Indices log near 2% gains on hopes of ease in lockdown, biz activity

The Sensex rose 606 points, or 1.9%, to end at 32,720 - the highest close since March 13

The frontline indices jumped nearly 2 per cent on Wednesday to end near seven-week highs, buoyed by a rally in global equities ahead of the US Federal Reserve’s policy announcement.

Hopes of easing the lockdown, as well as restarting business activity, helped the sentiment.

The Sensex rose 606 points, or 1.9 per cent, to end at 32,720 — the highest close since March 13. The Nifty gained 1.84 per cent, or 172 points, to reach 9,553. Both the indices are likely to close the month with double-digit gains, recouping nearly half the losses posted in March.

World stock markets, too, surged  following encouraging news for an experimental Covid-19 treatment and some positive earnings reports. MSCI’s gauge of stocks across the globe. US markets were in the green in the early trade, with Dow Jones gaining over two per cent.

The yield on the 10-year bond fell one basis point to 6.12 per cent, while the rupee strengthened 0.7 per cent against the US dollar, to end at 75.67, a one-month high.

 

 

Aggressive buying by foreign portfolio investors (FPIs) underpinned gains in the stocks and the rupee. According to provisional data, FPIs were net-buyers to the tune of Rs 722 crore.

Market players said the risk appetite was boosted by hopes of supportive action by central banks. US futures and European markets traded higher during Indian market hours, with investors eyeing Fed action. With the US’ central bank’s two-day Federal Open Market Committee meeting concluding on Wednesday, investors were awaiting Fed Chair Jerome Powell’s policy statement to give further guidance on the future path of interest rates. 

Earlier this week, the Bank of Japan had expanded monetary stimulus with a pledge to buy unlimited bonds.

The stimulus action has helped the markets look beyond gloomy economic forecasts. The Sensex is up 26 per cent from coronavirus lows, logged on March 23. This, despite some economists forecasting the real GDP to contract in FY21.  Market players said investors were eyeing the government’s next steps on restarting business activities as the lockdown is set to end. 

“There is a trade off between people’s lives and economy. The government will have to do a balancing act of restarting the economic activity to some extent. There will still be restrictions in contaminated areas,” said Chokkalingam G, chief investment officer, Equinomics Research & Advisory.

HDFC and HDFC Bank were the major drivers of the market rally on Wednesday. HDFC gained 7.1 per cent and contributed nearly 200 points to Sensex gains. HDFC Bank gained 5 per cent. All sectoral indices of the BSE, except one, advanced. The market breadth was in favour, with 1,391 stocks advancing and 961 declining.  

“Falling rates of new cases, combined with the central bank’s and government’s actions and partial opening up of the economy across the world has uplifted sentiments globally,”said Siddhartha Khemka, head — retail research, Motilal Oswal Financial Services.