Indices rebound as stimulus, earnings help offset virus fears
Domestic markets rebounded from a two-week low as global investors brushed aside worries over the delta variant of the coronavirus on hopes that central banks will continue their monetary policy support for some more time and optimism around corporate earnings.
Gaining for the first time in four days, the benchmark BSE Sensex rose 638 points and ended the session at 52,837, a gain of 1.2 per cent—the most since May 21. The Nifty rose 192 points to end the session at 15,824 or 1.2 per cent gain.
Analysts said though markets are concerned about the delta variant the availability of more vaccines is reassuring.
A study published in the New England Journal of Medicine on Wednesday showed that the Pfizer and Astrazeneca vaccines were effective against the delta variant, which added to optimism.
The US futures rose as earnings optimism countered concerns about growth disruptions. News reports suggested that more than 86 per cent of S&P500 constituents reported results that beat analysts’ expectations.
Analysts said the European Central Bank’s (ECB’S) policy decision and guidance are one global cue investors will look forward to. Investors are hoping that the ECB will decide on its easy money policy as Covid data points suggest the beginning of another wave of infections, even in countries that have vaccinated a large proportion of their populations.
“Taking cues from firm global markets, the domestic market witnessed robust momentum, shrugging off concerns over the spread of Covid-19 and FII selling. Global markets continued to hold onto their gains owing to solid earnings reports and turned their focus to the ECB policy announcement. A confirmation by the US Fed to continue its supportive policy in the upcoming meet despite rising inflationary pressure will be a key factor in maintaining the direction of the rally,” said Vinod Nair, head of research at Geojit Financial Services.
Analysts said that though the rise in Covid cases might rattle markets, further restrictions could also lead to central banks continuing their accommodative stance, which could ultimately benefit equities.
“Markets are currently dancing to global tunes, and earnings announcements are further adding to the volatility. As the signals are still mixed, we expect volatile swings to continue. Keeping in mind the scenario, we reiterate our cautious view and suggest keeping a check on leveraged positions,” said Ajit Mishra, vice-president – research, Religare Broking.
The market breadth was positive, with 2,184 stocks advancing and 1,065 declining. Four hundred and sixty stocks hit their 52week highs, and 521 were locked on the upper circuit on BSE.
Barring one, all sectoral indices on BSE ended the session with gains. Metal and Telecom stocks gained the most, and their gauges rose 3.02 per cent and 3 per cent, respectively.
All Sensex constituents except four rose. Tech Mahindra was the biggest gainer amongst Sensex stocks and ended the session with a gain of 5.6 per cent. Bajaj Finance rose 4.2 per cent, and Bharti Airtel rose 4 per cent.