It was a strong gap-up opening for the Indian stock markets on April 7, 2020 which mirroring global gains zoomed over 8.11%, or 2236.95 points on the Sensex to 29827.90, while the Nifty index jumped 7.87% or 635 points to reclaim 8700 mark.
Pharma and private bank stocks primarily led the rally with both Nifty pharma and Nifty Bank climbing 10% each in trade today.
All of the Nifty indices were in the green with Nifty Pharma climbing as much as 10% after the govt. lifted the ban on exports of APIs.
India VIX or volatility index also declined 7.76% to 51.01, which is a one-month low. Investors wealth increased by Rs 5.41 lakh crore in today's rally as total market cap of BSE-listed firms increased to Rs 1,13,87,478.64 crore.
Here are listed some of the factors that might be fuelling today's rally on the frontline indices:
1. Hopes of Staggered Lifting of the Lockdown:
Market participants overwhelmed over news reports that suggest government may consider staggered lifting of the 21-day nationwide lockdown which has dented business sentiment severely. In low-risk states and districts, the lockdown may be exited partially whereas in areas where number of coronavirus positive cases is rising, stringent curbs shall continue to be in place.
2. $1.3 Billion Expected in Indian Stocks After New FPI Norms Kick-In:
With transition into a new regime on foreign limit from April, wherein the limit for foreign portfolio investment (FPI) has been hiked to the sectoral foreign limit, providing more room for FPIs, analysts at Morgan Stanley expects a passive flow of $1.3 billion or about Rs. 9900 crore into Indian stock market through the MSCI Index
The move is seen as a relief at a time when Indian markets similar to global peers saw huge sell-off amid coronavirus crisis. Also there has been a massive exodus from Indian stocks by foreign funds to the extent of Rs. 1.25 lakh crore alone in March 2020.
3. Curb on Export of Pharma Drugs lifted amid Coronavirus:
The government lifted the restrictions on exports of 24 active pharmaceutical ingredients (APIs) and their formulations. Also as per a Business Standard report, the ban on HCQ or hydroxychloroquine export may also be removed. HCQ is claimed to be effective in treating novel coronavirus infection.
The ban on export of Paracetamol and its formulations (pain reliever) continues, as per a Reuters report.
The government imposed restrictions on drug export in March as the global supply chain saw huge disruption amid coronavirus crisis.
4. Rally in Global Markets:
As the fatality rate due to corona eased for the first time in a week in New York (biggest hot spot of coronavirus in the US) on Sunday, US stocks rallied, with major indexes surging at least 7%. Similar was the trend in Asian stocks with Japan's Nikkei trading with gains of 2%, South Korea's Kospi up 1.77%.
European markets are also trading in the green with German DAX up 4%, while the French CAC is up 3.45%.