Markets end two-month lows, helped by Biden's Covid-19 vaccination target

Most Asian and European markets rose after revised US vaccine targets boosted optimism and revived hopes of global growth.

India’s benchmark indices on Friday bounced off their two-month lows and most Asian and European markets jumped after the new US vaccine target boosted optimism and revived hopes of global growth recovery.

The Sensex rose 588 points, or 1.17 per cent, to close at 49,009, while the Nifty added 182 points, or 1.27 per cent, to finish at 14,507. In the previous two sessions, both the indices had fallen more than 3 per cent to end at their lowest levels since January 29, with rising Covid-19 cases and setbacks in the vaccination programme raising concerns about the pace of economic recovery.

The move by US President Joe Biden to double his vaccination target for the first 100 days to 200 million doses helped revive investor sentiment. “I know it's ambitious. Twice our original goal. But no other country in the world has even come close," Biden said in his first press conference since taking office.

Hou Wey Fook, chief investment officer, DBS Bank, said that while the speed of the equity rally might see some moderation in the coming months, an extreme drawdown was unlikely. “We believe that the markets will continue to be underpinned by the combination of a faster vaccination roll-out and strong corporate earnings rebound,” he said.

Stocks were also boosted by positive comments from US Federal Reserve Chairman Jerome Powell. He acknowledged the fiscal help from the US Congress and accelerated vaccine distribution. Powell said this had helped in faster-than-expected recovery in the US.

Experts said the supply chain disruption caused by the Suez Canal blockage was a cause of concern and could weigh on the markets in the coming days. Some reports suggested that the clearance could take weeks. The longer-than-expected closure has disrupted global supply chains with billions of dollars worth of goods waiting to be transported. International oil prices climbed 2 per cent because of the blockage.

Some experts attributed Friday’s gains to technical factors.

“It is a technical bounce. The markets were oversold and were due for a bounce. Secondly, global cues helped with major markets rising and India participated in the rally. We believe that the markets will undergo time and price correction. The indices will remain range-bound for the next few months," Jyotivardhan Jaipuria, founder, Valentis Advisors.

The market breadth turned positive after two days with 1,658 stocks advancing and 1,296 declining on the BSE. Barring four, all Sensex components ended with gains. Bajaj Finserv, Asian Paints, and Titan gained the most at over 4 per cent each. All the 19 sectoral indices of the BSE ended with gains, led by the BSE Metal index, which rose 3.5 per cent.

The Sensex has now posted back-to-back weekly losses. From its peak of 52,154, the index is down 6 per cent. Rising bond yields in the US and, more lately, the resurgence in Covid cases have weighed on the market performance.