Indices zoom to 1-mth high on unlock 1.0, buying by FPIS
The benchmark indices soared nearly 3 per cent on Monday after the government unveiled steps to start easing the nationwide lockdown, triggering hopes of an economic revival. Continued buying by overseas investors and a favourable monsoon forecast further bolstered the sentiment.
The Sensex gained for the fourth consecutive day, rising 879 points, or 2.7 per cent, to end at 33,303, while the Nifty rose 246 points, or 2.6 per cent, to end at 9,826. Both the indices closed at their highest level since April 30.
The strong gains were despite mixed global cues. In the past nine trading sessions, the Sensex and the Nifty have rallied 11 per cent, despite the grim economic outlook and rising number of Covid-19 cases. Market players said the domestic markets are catching up on the underperformance seen during the first half of May.
“People become more optimistic when they have the freedom to move, and their fear of Covid-19 eases off. Now you will have a pick up in the earnings and spending numbers from a low base. India has been a laggard vis-à-vis emerging markets in May. So, there is a bit of a catch up rally,” said Andrew Holland, CEO, Avendus Capital Alternate Strategies.
Overseas investors have been strong buyers of domestic equities in the past one week. Foreign portfolio investors (FPIS) bought shares worth ~1,575 crore on Monday. In the past five trading sessions, they have pumped in nearly ~10,000 crore into domestic equities.
To be sure, part of the inflows was on account of the ~8.400-crore share sale in Bharti Airtel.
Market players said investors need to be cau
tious given the global headwinds, particularly the tension between Washington and Beijing and social unrest in the US.
“There are concerns about what actions the US will take against China. However, President Trump’s reaction was mild and that cheered the Asian markets. Going forward, markets will be keenly tracking the medical breakthrough to cure Covid-19 and whether there is any surge in infections.
If there is any surge in infections, we might go back to lockdown. India eased the lockdown despite the rise in numbers. How swiftly we can get the supply chain moving also needs to be seen. People are complaining about short
age of labour,” said Jyotivardhan Jaipuria, CEO, Valentina Advisors.
During the weekend, government authorities announced plans of a phased lifting by allowing malls, restaurants, and places of worship to open from June 8. Meanwhile, the strict lockdown will be confined to areas that have a large number of active cases.
Only five of the 30 Sensex components ended with losses on Monday. Among the biggest gainers were Bajaj Finance (up 11 per cent), Titan (7.6 per cent), and Tata Steel (6.7 per cent). All of the 19 sectoral indices of the BSE ended with gains, with the BSE Consumer Durables index gaining the most.