Sensex hits 51,000 after 3 months, Nifty eyes record
India’s stock markets surged on Wednesday with the Sensex crossing the 51,000 mark for the first time in nearly three months while the Nifty inched closer to its record high.
Investor sentiment turned more bullish following a steady drop in daily count of cases and improvement in recovery rates of those affected by the infection. This has raised hopes of easing curbs in several states and a faster-than-expected recovery in Asia’s third-largest economy from the turbulence caused by the pandemic.
The BSE Sensex climbed 379.99 points or 0.75% to close at 51,017.52. The 30-stock index last closed above the 51,000-mark on 10 March.
The Nifty is away from its record high just by a hairline, ending at 15,301.45, up 93 points or 0.61%. It touched a lifetime high of 15,431.75 on 16 February.
Binod Modi, head of strategy at Reliance Securities said, “Domestic equities remained upbeat as improved visibility about economic recovery from second quarter of FY22 continued to lift investors’ sentiments. Further, robust Q4FY21 earnings and favourable commentaries from managements also aided to lift sentiments. Going forward, likely announcement of phased withdrawal of state level lockdowns in coming weeks and recovery in economic activities can potentially aid market to sustain rally in the near to medium term.”
Modi said softening in US bond yields and weak dollar index may offer additional comfort, which can essentially lead foreign institutional investors (FIIs) flow to turn favourable. Investors will continue to focus on trajectory of daily caseload of coronavirus and vaccination ramp-up in the country in the near term.
FIIs remained net sellers of Indian equites, but the pace of selling is narrowing. FIIs dumped Indian shares worth $232.61 million in May so far while domestic institutional investors bought shares worth ₹938.44 crore during the month.
Investor optimism, however, comes at a time when economic activity has been severely hit by regional lockdowns that has led economists to trim their predictions for gross domestic product (GDP) for FY22 by several notches.
The Nomura India Business Resumption Index (NIBRI), which tracks various high frequency data, fell to 60 for the week ended 23 May from 63 the prior week, at levels last seen in June 2020, after having fully recovered in February.
Sonal Varma and Aurodeep Nandi, economists at Nomura said that the continued steep fall in the index is indicative that the worst hit to activity will occur in May.
“Lockdowns look to spill into June, but a few states are announcing a slow roll-back of restrictions as their virus caseloads fall, which suggests a sequential improvement in activity in June. For a sustained recovery, the pace of vaccination also needs to pick up, which we expect to happen after June,” Varma and Nandi said. Economists at Barclays are concerned that the slow pace of vaccinations and rolling lockdowns are likely to weigh on India’s recovery. Barclays has further cut its GDP forecast for this fiscal to 9.2%, a reduction of 80 basis points from its earlier prediction.
Barclays estimates that a third wave of coronavirus infections in India will swell economic costs by at least an additional $42.6 billion, assuming another round of similarly stringent lockdowns are imposed for eight weeks. If India is hit by a third wave, Barclays estimates to further cut its FY22 GDP forecast to 7.7%. Meanwhile, India’s volatility index or VIX increased 10.77% to 20.87, indicating investors are anxious and nervous about the markets going forward.