A prompt and timely monetary policy response by the Reserve Bank of India to the wrecking Covid-19 wave gave Indian equities a booster shot, lifting the benchmark indices 0.8 per cent higher on Wednesday. The RBI's well guarded measures which, analysts believe, are tuned to the evolving situation, may support the economy going forward.
Earlier today, the apex bank announced a Covid-19 healthcare package of Rs 50,000 crore for vaccine makers, medical equipment suppliers, hospitals and patients in need of funds. Besides, individual borrowers and small businesses with loan outstanding of up to Rs 25 crore, and who did not avail for moratorium or restructuring relief last year, can ask for restructuring of their loans for up to 2 years.
Furthermore, the RBI will also have a special long-term repo operation window for small finance banks, whereby the banks can borrow funds up to Rs 10,000 crore at repo rate for deploying for fresh loans to SFBs.
The announcements received a thumbs up from market participants who lapped up pharma and bank stocks. The Nifty Pharma index climbed over 4 per cent with individual stocks such as Lupin, Aurobindo Pharma, Cadila Healthcare, Sun Pharma, and Torrent Pharma soaring between 5 per cent and 14 per cent.
The Nifty Bank index, meanwhile, ended 1.6 per cent up. Individually, AU Small Finance Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank, Axis Bank, IndusInd Bank, and ICICI Bank gained up to 4 per cent.
The Nifty Financial Services, IT, Auto, and Metal indices gained up to 1.3 per cent on the NSE.
Overall, the benchmark S&P BSE Sensex closed the session at 48,678 levels, up 424 points. In the intra-day trade, the 30-share barometer hit a high and low of 48,743 and 48,254, respectively.
On the NSE, the Nifty50 hit an intra-day high of 14,637 but shut shop at 14,618 levels, up 121 points.
In the broader markets, the S&P BSE MidCap index settled over 1 per cent higher while the S&P BSE SmallCap index gained 0.7 per cent.
The news on the economic front, however, remains sombre.
According to rating agency Standard & Poor, the second Covid wave may derail a strong economic recovery and worsen credit conditions in India. The agency believes that the economic expansion could take a hit of 1.2 per cent under a moderate state, leading to a GDP growth of 9.8 per cent for FY22. Under severe conditions, the hit could be 2.8 per cent, resulting in GDP growth of 8.2 per cent.
Meanwhile, growth in India's dominant services sector eased to a three-month low in April. The IHS Markit Services PMI fell to 54 last month from 54.6 in March, its lowest since January. It was, however, well above the 50-mark separating growth from contraction and outpacing expectations in a Reuters poll for a fall to 51.1.
Global markets
European stocks bounced back on Wednesday after a sharp selloff in the previous session, helped by gains in commodity and banking stocks. The pan-European STOXX 600 index rose 1.3 per cent, with the German DAX jumping 1.3 per cent and the UK's FTSE 100 gaining 1.1 per cent.
On Wall Street, futures of all three main indices were ruling up to 0.5 per cent higher.
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