Indices march on as Covid cases dip; post highest 2-week gain since Budget

Sensex has risen 2,690 pts, or 5.5%, since May 14

The benchmark S&P BSE Sensex rose 308 points, or 0.6 per cent, on Friday to cap its best two-week gain since the Union Budget in February. The index has added 2,690 points, or 5.5 per cent, since May 14 on optimism that the decline in Covid-19 cases will lead to easing of restrictions and help revive economic activity.

In the first two weeks of February, the Sensex jumped 5,259 points, or 11.4 per cent, enthused by the Budget, which strove to revive growth without increasing taxes.

The Sensex closed at 51,423—731 points, or 1.42 per cent, below its previous record closing of 52,154, touched on February 15. The Nifty50 index, meanwhile, closed at a fresh all-time high for a second day. Advancing for a sixth straight trading session, the index closed at 15,435 with a gain of 98 points, or 0.64 per cent.

Friday’s up move was entirely supported by gains in index heavyweight Reliance Industries (RIL), which rose 6 per cent on optimism around improvement in petrochemical margins. If not for RIL, the Sensex and the Nifty could have ended with losses.

“The market is cheering the downward trajectory of the Covid-19 curve as the recovery rate in the last few days has been higher than new cases. With the improvement in the curve, India is playing catch-up with the global market. If the government is able to arrest the spread completely in the next 15-30 days, then the unlock trade will play in the market and the current rally will sustain. Any delay in unlocking beyond June will be a key risk in the near term,” said Naveen Kulkarni, chief investment officer, Axis Securities.

On Friday, India recorded the lowest spike in daily infections in 44 days. This prompted Delhi Chief Minister Arvind Kejriwal to announce a gradual unlocking in the national capital from Monday as the situation is coming under control.

Analysts are projecting India Inc’s earnings growth to see a huge jump in FY22, and India’s GDP is likely to hit near double-digit growth. However, analysts warned that the slow vaccination drive might pose medium-term risks to growth, especially if India experiences a third wave.

“Markets remained in the green as investors basked in the glory of the $3-trillion market cap, which was achieved with ease thanks to the broad-based rally across market capitalisation. With FIIs being net sellers during April and May, the appetite shown by domestic investors is getting reflected in the buoyancy across the market breadth,” said S Ranganathan, head of research, LKP securities.

Asian and European markets mostly rose Friday to end a broadly upbeat week. Asian stock markets were powered by encouraging signs that the US economic recovery from the pandemic is gaining momentum. Rising Eurozone economic sentiment and the prospect of further stimulus in the US boosted the mood in the markets, helping European stocks inch towards record highs.

Investors are betting that the US will lead the world out of the Covid-19 pandemic, focusing on a multi-trillion-dollar spending boost by the Joe Biden administration.US President Joe Biden’s budget will increase federal spending to $6 trillion in the coming fiscal year and $8.2 trillion by 2031.

“The sustenance of the rally is supported by the recent improvement in foreign investment with the stabilising US yield and drop in the dollar index. The rupee regularly appreciates against dollar,” said Vinod Nair, head of research at Geojit Financial Services.

The market breadth was negative, with 1,699 stocks declining against 1,433 advancing on BSE.

Three hundred and thirty-nine stocks hit their 52-week highs, and 374 were locked in the upper circuit. Apart from RIL, Mahindra & Mahindra and HDFC Bank were the best performing Sensex stocks and rose 2.1 and 1.4 per cent, respectively. Energy and oil and gas stocks rose the most, and their indices gained 4.35 and 1.17 per cent, respectively.