Mumbai: The SENSEX opened moderately lower but later staged a smart recovery on the back of a smart rally in Information Technology (IT) and public sector unit (PSU) stocks during morning trading on the Bombay Stock Exchange (BSE) on June 2, on fresh buying support.

However, bank stocks suffered a sharp setback due to fairly heavy sell-off triggered by the government's decision to accept return of equity from PSU banks at market prices.

Earlier, the announcement that the return of capital by banks would only be at par had prompted a smart rally in banking sector, brokers said.

Reacting positively to a sharp rally on Wall Street last weekend, IT counters, particuarly Infosys Tech, Satyam Computers and HCL Tech that have fairly high weightage in the SENSEX, made a strong turnaround on buying from foreign funds.

The BSE sensitive index opened moderately down at 3,176.56 as against May 30 close of 3,180.75 and later rallied smartly to 3,196.66 at 10.30 am (IST).

Foreign institutional investors (FIIs) who have been net buyers to the tune of Rs 505 crore in the first four days of last week, were believed to be major buyers on June 2 morning.

PTI