Global markets rally on EU package, Sensex ends 561 points up

The benchmark Sensex saw a sharp bounce back and rallied 560 points on positive global cues. Short covering after last week's sell-off and Supreme Court's judgment in favour of RIL by 2:1 also supported today's rally. All the global markets skyrocketed after European Union and International Monetary Fund agreed a massive rescue package to control Greece's debt crisis spreading to other Eurozone countries.

The European Union ministers agreed an emergency aid worth 500 billion euros (USD 670 billion) of loans and loan guarantees to any euro zone countries needing funds, plus about 250 billion euros from the International Monetary Fund. This package was on the same scale of the USD 700 billion Troubled Asset Relief Program (TARP) launched by the United States to control the financial crisis of 2007-2009.,

This news was quite enough for all markets across the globe to recover their last week's losses to major extent. European markets like FTSE was up 5% and DAX was up 4.5%. CAC 40 Index surged 8.6% at the time of closing of Indian equities. Dow futures gained 3.5% and Nasdaq Futures rose 2.66%.

Asian markets like Hang Seng jumped 2.5% and Jakarta went up 4%. Nikkei, Straits Times, Kospi and Taiwan Weighted were up 1.3-2%. Shanghai was up just 0.4%. Even Euro gained more than 2%.

Commenting on the same, Nouriel Roubini of RGEMonitor.com said Greece needs to raise taxes, cut spending. "This financial crisis was cause by excessive leverage and net accumulation in the private sector, households, financial institutions, and even corporate sectors in some countries. While there is a lot of talk about deleveraging those private debt ratios, which are now at very high levels, there has been massive deleveraging of the public sector."

He sees the risk of contagion spreading to US and Japan. A deficit of 3% is not sustainable in the US, he added.