Benchmark indices roar back as risk appetite improves globally

Strong GDP growth, PMI manufacturing, GST collection data, and oversold market spur activity

The benchmark indices rallied along with their global peers as risk sentiment improved following a sharp correction triggered by concerns around the Omicron variant and US Federal Reserve Chairman Jerome Powell’s hawkish commentary.

The markets were propelled by a combination of a buy-on-dips strategy and optimism on the back of macroeconomic data released over the last two days, said experts.

The S&P BSE Sensex opened higher despite a sharp correction in the US markets overnight. It ended the session at 57,684, a gain of 620 points or 1.09 per cent. The Nifty, on the other hand, rose 183 points to end the session at 17,167, a gain of 1.08 per cent. Sentiment was boosted by gains in the European and US futures market.

The India Vix cooled 8 per cent as a result. Gross domestic product (GDP) grew 8.4 per cent year-on-year in the September quarter as vaccinations were ramped up and restrictions on movement were eased. The growth, however, came on the back of a low base. The goods and services tax (GST) collection stood at Rs 1.31 trillion in November, the second-highest monthly tally since it was introduced in 2017. Moreover, GST revenues in November were 25 per cent higher than in the same month last year and 27 per cent more than the corresponding month in the pre-Covid year of FY20. India’s manufacturing activity picked up and grew at the fastest clip in 10 months.

The IHS Markit Purchasing Managers’ Index (PMI) rose to 57.6 in November against 55.9 the previous month. This marked the fifth straight month when PMI was above 50, indicating growth.

“The high-frequency key economic indicators remained upbeat in recent months and reflect sustained economic activity and earnings growth. 

Further, the government’s effort to calm high commodity prices by cutting excise duties on petrol and diesel augur well, which along with CPI remaining below the RBI’s reference range. 

This will also aid the RBI to keep the interest rate at current range to support recovery,” said Binod Modi, head strategy, Reliance Securities.

Asian markets mostly rose on Wednesday as traders assessed the outlook for the global economy after top drug makers offered differing opinions on their vaccines’ efficacy against Omicron.

“Global markets are still rattled by the new Covid variant, and this may continue in the near future. At the same time, favourable domestic data may result in some intermediate relief, but the possibility of any major directional move seems unlikely. Keeping all in mind, it’s prudent to stay cautious and wait for clarity,” said Ajit Mishra of Religare Broking.