Bulls gain strength: Sensex reclaims 50,000, Nifty ends above 15,000

Fall in Covid-19 cases, prospect of economy normalising in near term lift indices for a second day

The Indian markets posted sharp gains for the second day on Tuesday, with the Sensex reclaiming the 50,000 mark and the Nifty topping 15,000 after more than two months. Automobile and banking stocks rallied amid optimism that the lethal second wave of Covid-19 has peaked.

Most Asian markets gained as the US dollar weakened and the Taiwanese markets rebounded.

The Sensex ended the session at 50,193 with a gain of 612 points, or 1.2 per cent. This is the first time since April 1 that the Sensex has closed above 50,000. The Nifty, on the other hand, closed at 15,108, gaining 185 points, or 1.2 per cent. The 50-stock index settled above 15,000 for the first time since March 12. In the past two trading sessions, the benchmark indices have soared 3 per cent.

Foreign portfolio investors (FPIs) bought shares worth Rs 618 crore on Tuesday, while their domestic counterparts purchased shares worth Rs 450 crore.

India reported 263,533 new Covid-19 cases on Tuesday -- the second consecutive day when the cases came below the 300,000 mark. Analysts said the drop in Covid cases gave hope that the worst of the second wave was behind us, and the markets would start discounting that immediately. The prospect of the economy normalising in the next few weeks has enthused investors, they said.

"We have been an underperformer for a while, and the lower number of cases gives rise to optimism. We are getting on the right path with lockdowns being extended. The low numbers of the last two days may not be how things will be, but we are on the right path,” said Andrew Holland, CEO of Avendus Capital Alternate Strategies.

The concerns of June being a washout quarter and a sharp correction in FY22 estimates have also been allayed, said analysts.

"We believe investors will continue to take comfort from receding fresh daily cases. This indicates that the assumption of the second Covid-19 wave daily caseload peaking by the end of May or mid of June holds, and the adverse impact of the second wave should not be felt beyond Q1FY22," Binod Modi, head of strategy at Reliance Securities, said.

However, the rising death toll, slow roll-out of vaccination, and Covid spreading to rural areas are worrying, said experts.

Hopes of the US Federal Reserve not tightening its monetary policy immediately have also cheered investors. On Monday, US Federal Reserve Vice-Chairman Richard Clara said the job reports showed the economy had not reached the stage to warrant scaling back bond purchases. The reopening of economies boosting growth has counterbalanced concerns of rising inflation in the US.

Sentiments were also boosted by the weakening US dollar against major global currencies. A weak dollar makes investing in emerging economies like India more attractive.

Experts said global developments would guide how the Indian markets move in the near term.

"Anything globally negative will have an impact at the moment. Until we get satisfactory vaccination roll-out, we are hostage to what happens offshore," said Holland.

As many as 312 stocks hit their 52-week highs, and 434 were locked in upper circuit on the BSE. The market breadth was positive, with 1,946 stocks advancing and 1,144 declining. Four-fifths of the Sensex constituents ended the session with gains. Mahindra & Mahindra rose 5.9 per cent, Bajaj Auto rose 5.1 per cent, and Titan rose 4.9 per cent. Barring two, all sectoral indices ended the session with gains. Auto and consumer discretionary goods and services stocks rose the most, and their gauges rose 3.2 per cent and 2.5 per cent, respectively.

The prospect of a good monsoon is expected to revive rural demand, and auto and consumer discretionary items are expected to benefit. The Bank Nifty index rose 1.4 per cent, adding its two-day gain to over 5 per cent.