Nifty scales fresh peak on recovery prospects
MUMBAI: Stocks gained nearly 1% on Friday, with the Nifty hitting fresh highs on improved prospects of economic recovery. Investors bet that the regional lockdowns will be relaxed soon as daily new Covid infections declined.
A rally in global equities also lifted Indian stocks as investors worldwide turned their focus to a multi-trillion-dollar spending boost proposed by US President Joe Biden.
The National Stock Exchange’s Nifty index reclaimed the record high mark after nearly three months. The 50-share index hit 15,469.65, surpassing the previous record of 15,431.75 on February 16. The Nifty rose 97.80 points, or 0.64%, to close at 15,435.65. The BSE Sensex gained 307.66 points, or 0.60%, to close at 51,422.88.
Stocks in other Asia-pacific regions rose, led by gains in Japan, with the Nikkei rising 2.1%, while South Korea’s Kospi gained 0.73%. The New York Times reported that Biden will seek $6 trillion in federal spending for fiscal 2022, a day before the White House is expected to unveil its budget proposal.
With the improvement in the Covid infection curve, India is playing catch-up with global markets, said Naveen Kulkarni, chief investment officer of Axis Securities.
“If the government is able to arrest the second Covid wave spread completely in 15-30 days, then the unlock trade will play in the market, and the current rally will sustain. Any delay in unlocking the economy beyond June will be a key risk in the near term,” Kulkarni said.
Another reason for optimism despite the economic implications of the second wave is the expectations of an announcement of a stimulus package by the government.
Bloomberg reported on ZZZ that the government is preparing a stimulus package for sectors that have been the worst affected by the pandemic, aiming to support an economy struggling with a slew of localized curbs. The finance ministry is working on proposals to bolster tourism, aviation and hospitality industries, along with small and medium-sized companies, it said.
Meanwhile, the India volatility index, or VIX, fell 12.78% to close at 17.40, indicating that fear among investors is ebbing. “The buoyancy stems from improving pandemic-related conditions, and also due to broad indications that it has actually peaked. This gives greater certainty about the future in terms of the likely relaxation of lockdowns in major cities, and also a faster return to normalcy,” said Joseph Thomas, head of research at Emkay Wealth Management.
The second covid wave appears to have peaked, as the daily new case count and positivity rate have fallen in the past few days, according to Tanvee Gupta Jain, an economist at UBS. The Ubs-india Activity Indicator slipped further to 78.6 during the week ended May 23, the slowest weekly decline since end-march. The adverse impact on sequential growth is less severe than in the June 2020 quarter as lockdowns are more targeted, she said.