The benchmark Sensex closed at 41,143, up 0.9 per cent, or 353 points, extending its three-day rally to 1,407 points, or 3.5 per cent. The Nifty50 index rose 110 points, or 0.94 per cent, to close at 12,089.
Most equity markets rallied by over a per cent on hopes that the impact of the coronavirus on the global economy won’t be as severe as anticipated. Moreover, news reports suggested scientist in the UK made a significant breakthrough in the race to develop a vaccine.
Market players also rejoiced positive domestic economic data, as the services Purchasing Managers’ Index (PMI), released Wednesday, rose to a seven-year high at 55.5 in January. Earlier, the manufacturing PMI had shot up to an eight-year high at 55.3 in January from 52.7 in December.
Analysts said underlying growth dynamics for the economy appeared to be bottoming out with some high-frequency indicators showing positive trends.“Rural consumption is on the way to recovery, given the increase in food inflation, improving farm economics and high reservoir levels. Moreover, monthly auto numbers are showing stability. Select sectors with better earnings visibility will continue enjoying valuation premium over the broader markets,” said a note by Motilal Oswal.
Foreign portfolio investors (FPIs) were net buyers for the second consecutive day on Wednesday. They bought equities worth Rs 249 crore. Domestic institutional investors were net buyers to the tune of Rs 263 crore.
Some believe the Indian markets could benefit from the outbreak of coronavirus, which has hit economic activity in regional peers such as China and Southeast Asian countries.
“In the near term, India has the potential to look safer,” said Saion Mukherjee, India equity strategist, Nomura, referring to the coronavirus outbreak. A sharp drop in oil prices along with a rally in global equities helped the domestic markets recover this week. Analysts said investors resumed buying on hopes that a fall in crude prices will provide macro stability at a time when the government is trying hard to stick to its fiscal deficit target.
Brent crude hit a 52-week low on Tuesday at $53 per barrel. Though the prices rose nearly three per cent on Wednesday, they were still 18 per cent below early 2020 levels.
Experts say markets are keenly eyeing Thursday’s RBI monetary policy meeting. While the central bank is expected to keep interest rates unchanged, investors will take cues on economic growth and inflation projections.
Among Sensex components, Tata Steel gained the most at 5.14 per cent, Bharti Airtel and HDFC were the other best-performing Sensex stocks, gaining 2.8 per cent and 1.9 per cent, respectively. All the sectoral indices of BSE, barring three, rose led by the gauge of metal stocks.
Earnings announcement for the December quarter has been a mixed bag. According to Bloomberg, 17 out of 34 Nifty50 companies that have posted earnings so far have missed estimates.
The latest rebound in the market comes after a disappointing trading session on Saturday, when the benchmark indices dropped by more than two per cent because of disappointment over Budget.
Mukherjee said investors are once again looking at basics. “The focus will again be on growth and earnings. Hopefully, the global environment will continue to be supportive,” he said.