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Indices soar 4% on stimulus hopes, end short week with 13% gain

Domestic stimulus hopes, oil talks lift sentiment

Markets
Overseas investors were strong buyers for the third session in a row
Sundar Sethuraman Mumbai
4 min read Last Updated : Apr 09 2020 | 11:46 PM IST
The benchmark indices posted strong gains on Thursday, jumping 4 per cent and ending the truncated week up 13 per cent. Reports of a second stimulus package by the government, talks between major oil producers to cut output, and optimism of lower spread in Covid-19 cases boosted investor sentiment.

Overseas investors were strong buyers for the third session in a row. They bought shares worth Rs 1,738 crore, taking their three-session buying tally past Rs 4,200 crore. The Sensex closed at 31,160, up 1,266 points or 4.2 per cent, while the Nifty rallied 363 points or 4.15 per cent to end at 9,112. Both indices are now up almost 20 per cent from their recent lows on March 23.

News reports said the government was mulling a second stimulus package worth Rs 1 trillion to help small and medium businesses (SMEs). Last month, the Centre had announced a Rs 1.7-trillion stimulus plan that included direct cash transfers and food security measures to tide over the lockdown and economic impact of the pandemic.

“With a further drop in oil prices, there is some fiscal headroom for the government, and the hope is that it will utilise the same to announce more stimulus measures,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.

Hopes that the effect of the lockdown will start showing positive results in the coming days also boosted sentiment.

 

 
“World over, the number of new cases is either levelling out or reducing. Therefore, people are confident there is light at the end of the tunnel. The question is whether the drop will continue once the lockdown is lifted, or will there be an uptick in cases,” said Mukherjea. Market analysts said valuations have become reasonable for most sectors, and have advised investors to accumulate stocks with strong balance sheets, market leadership, and quality management.

The future trajectory of markets will depend on whether the 21-day lockdown gets extended, and the nature of restrictions in the coming days, said experts.

“We have not done enough tests compared to other countries. In terms of the lockdown, we are ahead. How things pan out in terms of the lockdown will be a key determinant of whether the index is going to sustain that high levels,” said Abhimanyu Sofat, head of retail research, IIFL Securities.  

However, some analysts remained sceptical about this week’s sharp spurt. “There should be some stop to this rally. There is a consensus that restrictions of some form will continue after April 14. If we are still in under a lockdown, it shows that the Covid-19 crisis is not sorted and it will take a while. Many industries will not operate, which means there will be further economic slowdown,” said Ambareesh Baliga, a market expert.

The market breadth was positive, with the total number of advancing stocks at 1,872 and declining at 538, on the BSE.

All Sensex components barring four ended the session with gains. Mahindra & Mahindra was the best-performing Sensex stock, rising 17 per cent. Maruti and Titan rose 13.2 and 11.1 per cent, respectively.  All BSE sectoral indices ended the sessions with gains. Auto and consumer durables rose the most, with their gauge rising 10.3 per cent and 7.1 per cent, respectively.



Sensex, Nifty near bull market

Benchmark indices are on the cusp of a bull market— a term used for 20 per cent surge from the recent lows. The Sensex and Nifty have gained around 19.8 per cent from their lows of 25,981 and 7,610, respectively made on March 23.

Asian peers such as South Korea, Philippines and Indonesia have already entered technical bull markets, having risen over 20 per cent from lows. The rebound in the US equities has been sharper with the Dow Jones Index jumping 26 per cent from its 2020 lows. While most equity markets are entering bull territory, nobody wants to call it that, given the uncertainty around the spread of Covid-19 and the damage caused to the economy. Many believe such sharp rallies are a feature of a bear market. “We assume the ongoing rally is a bear market rally and is least likely to be sustainable,” says Jimeet Modi, founder & CEO, SAMCO Securities. While many believe the markets could eventually head back lower, not many are sure whether they would retest March lows. CLSA, however, has a theory to call the market bottom. “This bear market may have hit the point of capitulation in March, but this is likely to be followed by a period of apathy and lower volatility where we reach a point of investor dismay on equity investment,” the brokerage says in a note.

Topics :CoronavirusIndicesstock marketOil PricesSMEs

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