Sensex, Nifty rebound as yield pressure eases; ONGC, UltraTech gain

The Indian markets recouped nearly half the losses on Friday as investor sentiment improved following stability in the bond market after last week’s rout. Central banks across the world reassured investors that they would continue with their accommodative policy measures which helped soothe nerves.

The progress in the US stimulus package and gross domestic product (GDP) growth in India for the quarter ended December 31, after two consecutive quarters of contraction, also helped sentiment.

The benchmark Sensex rose 750 points or 1.5 per cent to end the session at 49,850; the Nifty closed at 14,761, a gain of 232 points or 1.6 per cent. On Friday, the Sensex and the Nifty plunged nearly 4 per cent in what was its biggest fall in nearly 10 months. Worries that central banks would have to withdraw monetary policy support sooner than expected, as government stimulus and pent-up demand would lead to a rise in inflation had rattled the financial markets globally.

Wall Street's major averages, too, were up around 2 per cent  in the morning session, with Dow Jones trading with a gain of  679.12 points.

The Indian market breadth was positive on Monday, with total advancing stocks at 1,948 and those declining at 1,121. All the Sensex components ended the session with gains. Powergrid was the best-performing Sensex stock and rose 5.94 per cent; ONGC and UltraTech surged 5.4 per cent and 4.3 per cent, respectively. All the BSE sectoral indices, barring one, ended the sessions with gains. 

Basic materials and Utility stocks gained the most, and their gauges rose 3 and 2.5 per cent, respectively. Bharti Airtel was the only losing Sensex stocks. The telecom major’s stock plunged 4.5 per cent ahead of spectrum auction.

Analysts said the pace of the movement of Treasury yields was more critical and that the markets would be unperturbed as long as the rise in bond yields remained gradual.

"Bond yields were at historic lows, and it is expected to go up anyway. Fed and other central banks are not in a hurry to raise rates. As long as it goes up slowly, its impact will be bearable. Moreover, rising yields also signify that growth is picking up, and as long as both growth and yield go up simultaneously, there is no reason to worry," said Jyotivardhan Jaipuria, founder, Valentis Advisors.

On Saturday, the House of Representatives in the US approved the Biden administration's $1.9-trillion pandemic package. US President Biden urged the Senate to take quick action on the Bill after the House passed it. Analysts said expectations of stimulus measures would continue to provide a boost for equities.

India posted GDP growth of 0.4 per cent for Q3, on Friday. Though the GDP is expected to fall 8 per cent for the financial year, the December quarter GDP figures are seen as further strengthening the V-shaped recovery.

Market players said the Covid-19 vaccination drive also raised hopes of further improvement in GDP. The top US health body's unanimous vote to recommend Johnson & Johnson's shot for widespread use also boosted sentiment.

"The progress on the US stimulus package and stability in bond yields triggered a rebound in early trade, followed by a range-bound movement until the end. Besides, participants also reacted to the GDP numbers, which showed marginal growth after seeing a contraction in the last two quarters," said Ajit Mishra, VP-research, Religare Broking.