Investors choose hope over fear; Sensex up 673 pts, Nifty reclaims 17,800

The benchmark indices extended their gains during the second session of the new year as investors looked past the surging Covid cases and continued to bet on India's economic recovery.

The Sensex ended Tuesday's session at 59,856, following a gain of 673 points or 1.1 per cent. The surge was led by Reliance, TCS, and finance majors in the index.  The Nifty50, on the other hand, rose 179 points or 1.02 per cent and ended the day at 17,805.

The market breadth was positive, with 1,848 stocks gaining and 1,538 declining on the BSE. Around 551 stocks hit their 52-week high on the BSE, and 537 were locked on the upper circuit. NTPC was the best-performing Sensex stock and rose 5.5 per cent.

There were bouts of volatility until 90 minutes before Tuesday's close bell as the rising number of Omicron cases and restrictions in several parts of the country continued to worry investors. A weekend curfew was announced in Delhi and the Punjab government imposed a night curfew, on Tuesday. The mayor of financial capital Mumbai has said a lockdown could be necessary if the daily cases cross the 20,000-mark in the city.

But investors chose to focus on economic recovery  from the pandemic. The goods and services tax ( GST) collection and a strong Purchasing Manager's Index (PMI) reading cheered investors. Though the PMI number for December (55.5) was lower than November (57.6), it was still above 50, separating growth from contraction. Similarly, the GST collection during December was Rs 1.29 trillion, the sixth consecutive month when the mop-up was above Rs 1 trillion.

“There are rising cases of Covid without a spike in hospitalisations. Investors are expecting that the new wave may forestall monetary tightening. The corporate commentary remains very positive. There is clear visibility for capex revival, which was not there for the last several years,” said Saurabh Mukherjea, founder and chief investment officer, Marcellus Investment Managers.

Ajit Mishra, VP-research, Religare Broking, said the Indian markets are currently following their global counterparts. At the same time, domestic factors have mixed indications. “Apart from banking majors, the rotational buying in the index heavyweights from other sectors is helping the index go higher. "

But analysts now expect a rise in volatility as investors navigate tightening of monetary policy and supply chain disruptions. “The surge in Covid cases in India is of concern now,” said Mitul Shah, head of research, Reliance Securities.