Investor optimism on Q3 earnings propels indices; Sensex rises 651 points

Nifty rises 1% to close above 18,000 for first time since November 15

The benchmark indices gained amidst hopes that companies will post robust earnings for the December quarter (Q3) of financial year 2021-22 (FY22) as the results season kicks off this week. The central government’s statement that Covid-19 cases will require less hospitalisation than in the second wave also cheered investors.
 
The benchmark Nifty closed the session above the 18,000-mark for the first time since November 15. It ended the session at 18,003, a gain of 190 points or 1.07 per cent. The Sensex ended the session at 60,395 a gain of 651 points or 1.09 per cent.
 
Analysts said investors expect strong earnings from the initial batch of companies this week. However, the US 10-year bond yield’s appreciation and strengthening dollar are likely headwinds for equity markets. Investors will also keenly monitor the US inflation number.
 
“The initial buoyancy will stay for some time. But we have to see how markets are going to react when companies with margin pressures come out with their numbers,” said UR Bhat, co-founder of Alphaniti.
 
In a note to investors, Motilal Oswal said it expects the universe of companies that it tracks to report another healthy quarter with 22 per cent year-on-year (Y-o-Y) growth. “While the aggregate growth is impressive, it is narrow and driven by just four sectors — metals, BFSI (banking, financial services and insurance), O&G (oil and gas) and IT,” the note said.

 
The Union health ministry’s statement that only 5-10 per cent of active Covid cases would need hospitalisation this time around, against 20-23 per cent in the previous wave, soothed nerves. Analysts said some Covid complacency is creeping in after reports about the current wave putting less stress on the public health system.
 
“Markets were waiting for some information on Omicron. So, there was some relief when the reports of the current wave leading to fewer hospitalisations came. Markets are hoping that the economic impact will not be very painful, “ said Bhat.
 
Markets across the globe are bracing for volatility as investors grapple with navigating the absence of liquidity support from central banks. Low interest rates and liquidity had insulated equity markets from the adverse effects of the pandemic and helped them post record gains.
 
“Markets are showing tremendous resilience amid the rising Covid cases, and the focus would now shift to the earnings season. Besides, key macro data such as IIP and inflation would also be on investors’ radar. Amid all this, global cues would continue to induce volatility. Apart from banking, participants should focus on metals, energy, and select auto counters for long positions,” said Ajit Mishra, VP-research, Religare Broking.
 
The market breadth was strong, with 2,630 stocks advancing and 1,016 declining on the BSE. Around 940 stocks were locked on the upper circuit on BSE, and 626 hit their 52-week highs.

 
Two-thirds of Sensex constituents ended the session with gains. Infosys contributed the most to the Sensex’s gains and rose 2.09 per cent.