Sensex, Nifty log biggest single-day gain in 10 yrs
Benchmark index Sensex rises 6.98%, while Nifty was up 6.6%
MUMBAI: Indian stock markets made a strong recovery on Wednesday in sync with other global peers after the US stimulus deal bill for a $2 trillion package was passed last night. Benchmark indices ended nearly 7% higher, the biggest one-day gain since May 18, 2009. The BSE Sensex ended at 28,535.78, up 1861.75 points or 6.98%, while the 50-share index Nifty was at 8,317.85, up 516.80 points or 6.62%.
Stocks in Japan, China, Hong Kong, Australia, and Korea were up 2-8% after the White House and the Senate reached a deal on a gigantic $2 trillion stimulus bill to mitigate the impact of Covid-19.
Domestic markets are hopeful that the spread of Covid-19 will be contained in India following the nationwide lockdown, analysts said. Investors also expect a fiscal stimulus package soon to uplift the economy. The government’s decision to implement a complete lockdown, barring essential services, in the entire country for 21 days may help slow down the spread of Covid-19, they said.
Indian markets received a boost from the positive global cues as the clearing of the $2 trillion stimulus by political leaders in the US turned sentiments positive globally, according to Gaurav Dua, head, capital market strategy and investments, Sharekhan by BNP Paribas. “In India, the decision to take an aggressive step to fight Covid-19 has also been welcomed by the markets. Today’s sharp uptick shows that any sense of stability can lead to sudden turnaround in the direction of markets,” he said.
As Indian markets continued the rally for the second day, the volatility index or VIX also fell 7.94% to end at 76.96 on Wednesday.
“There is a lot of momentum in the risk-on rally, but volatility remains on overdrive and twothree consecutive days of gains are still awaited across the globe,” said Deepak Jasani, head, retail research, HDFC Securities. “Dire economic numbers expected over the next few days, though partly discounted, can impact sentiments,” he added.
Robust rally in heavyweights such as Reliance Industries Ltd, Kotak Mahindra Bank, Maruti, and HDFC twins also drove markets higher. Shares of Mukesh Ambani-led Reliance Industries gained 14.65%. Investors rushed to buy shares of Reliance on a Financial Times report that Facebook is in talks to buy a multibillion-dollar stake in Ambani’s digital operation Reliance Jio to expand its presence in this growing digital market.
However, clamour continues for a fiscal stimulus package to address the slowdown and disruption caused by the lockdown. “We hope the government and the Reserve Bank of India (RBI) provide the necessary fiscal and monetary support to counter the inevitable slowdown in the economy. We believe that the recent bold political and social measures must be backed by bolder economic ones,” said Kotak Institutional Equities.
Foreign institutional investors (FIIs) continue to dump Indian shares. In March alone, they have sold domestic equities worth $7.04 billion, and $7.02 billion in debt instruments. Domestic institutional investors (DIIs), including mutual funds and insurance companies, bought Indian shares worth ₹46,769.85 crore in March.
Analysts fear that the lack of a fiscal stimulus package from the Indian government may lead to more sell-offs by FIIs as central banks and governments in other countries have stemmed up measures to cushion the economic impact of the pandemic. “In the absence of significant policy action from both the government and the RBI, the risks to fundamentals keep rising,” said Morgan Stanley.
The global brokerage has cut estimated earnings for the third time since the Covid-19 outbreak. “Our FY21 BSE Sensex earnings per share (EPS) growth is now 10%, down 20% from mid-February. Our revised Sensex targets for December 2020 suggest an upside of 23% in the base case and 6% downside in the bear case where valuation multiples will be at all-time lows,” it said.