PMI, global cues lift indices

The benchmark indices rose on Wednesday mirroring gains in the global markets after news of a breakthrough in coronavirus vaccine and optimism over positive economic data at home.

The Sensex closed at 41,143, up 0.9 per cent, or 353 points, extending its threeday rally to 1,407 points, or 3.5 per cent. The Nifty rose 110 points, or 0.94 per cent, to close at 12,089.

Most equity markets rallied by over a per cent on hopes that the impact of the coronavirus on the global economy won’t be as severe as anticipated. Moreover, news reports suggested scientist in the UK made a significant breakthrough in the race to develop a vaccine.

Market players also rejoiced positive domestic economic data, as the services Purchasing Managers’ Index (PMI), released Wednesday, rose to a seven-year high at 55.5 in January. Earlier, the manufacturing PMI had shot up to an eight-year high at 55.3 in January from 52.7 in December.

Analysts said underlying growth dynamics for the economy appeared to be bottoming out with some highfrequency indicators showing positive trends.

“Rural consumption is on the way to recovery, given the increase in food inflation, improving farm economics and high reservoir levels. Moreover, monthly auto numbers are showing stability. Select sectors with better earnings visibility will continue enjoying valuation premium over the broader markets,” said a note by Motilal Oswal.

Foreign portfolio investors (FPIS) were net buyers for the second consecutive day on Wednesday. They bought

equities worth ~249 crore. Domestic institutional investors were net buyers to the tune of ~263 crore.

Some believe the markets could benefit from the outbreak of Coronavirus, which has hit economic activity in regional peers such as China and Southeast Asia.

Brent crude hit a 52-week low on Tuesday at $53 per barrel. Though prices rose nearly 3 per cent on Wednesday, they were still 18 per cent below early 2020 levels. Experts say markets are keenly eyeing Thursday’s RBI monetary policy meeting.

While the RBI is expected to keep rates unchanged, investors will take cues on economic growth and inflation projections.