Indian indices tracking strength in Asian equities saw some low level buying. This was despite the rising coronavirus situation in the country and FIIs continuously selling in the Indian markets. Here are the factors that led to around 1.5% surge in stock markets:
1. Global cues:
The risk on sentiment improved globally as the recent data reflected that the world economic recovery from the lethal pandemic was well on track. At the time of writing this report, Asian indices traded mixed, with Japanese Nikkei up by over 0.3% while Hang Seng was down 0.27 percent.
2. Heavyweight stocks lifted sentiment:
Shares of heavyweight stocks such as RIL, ICICI Bank and SBI have added to the gains on the index. Individually, the stock of Reliance Industries gained up to 3 percent to day's high price of Rs. 1962 per share on the NSE. The oil to telecom conglomerate and BP declared today the start of output from the Satellite Cluster gas field in block KG D6 off India's East coast.
ICICI Bank shares also gained over 6 percent to day's high of Rs. 605.5 after the company's March quarter results of FY21 which posted 260 percent jump in net profit.
3. Broader markets also support headline indices:
Though broader markets underperform the headline indices, there also been imparted strength to the overall markets. Among the Nifty Midcap 100 stocks, the stock contributing to the gains, include SAIL, Jindal Steel, Godrej Properties, Gujarat Gas and Dalmia Bharat.
4. UBS Bets On Indian Equity; India among the most preferred equity market:
UBS in its report has featured India as the most preferred equity market. Additionally, India, China and Singapore rank as the ‘most preferred' destinations. At a macro level, however, it remains bullish on emerging markets (EMs) as compared to the developed market (DM) peers, where it feels that the returns will remain in single-digits going ahead. Markets, it feels, are now transitioning to a more mature phase of the recovery trade. The initial stage, according to the global research and brokerage house, was characterised by unprecedented policy intervention, which saw real rates collapsing and price-to-earnings (P/E) expansion supporting equities.
Covid news is bad but markets are sensible and therefore will discount the positive news like apparent flattening of the curve in states like Maharashtra. Going by the experience of countries that went through the second wave, it is likely that India's second wave will peak soon, but the pain and sufferings in the short run will be highlighted. Since the market is forward looking, its focus will be the medium to long-term trend. Meanwhile, Q4 results continue to be encouraging. ICICI Bank's results are very good on all parameters, says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
The sustained selling by FIIs in April, so far, is negative but FII selling is now more than compensated by DII buying. Market's resilience during this health crisis is positive and has to be taken seriously.