Investors had something to cheer going into the weekend, with the domestic benchmark indices rallying about 6 per cent, underpinned by a slew of support measures announced by policymakers around the world to cushion the economic shock of the coronavirus pandemic.
Markets across Asia and Europe gained as Brent crude prices rose above $30 a barrel, while the US dollar weakened. The Sensex closed at 29,916, up 1,628 points, or 5.8 per cent, while the Nifty rallied 482 points, or 5.83 per cent, to end at 8,745 — the biggest single-day gains for both the indices since May 2009. The gains helped the market prune the weekly loss to 12.3 per cent, the worst since October 2008. If not for Friday’s 6 per cent jump, the market would have logged its worst weekly setback in history.
To avert a global recession, most central banks have announced measures worth trillion of dollars. The US Federal Reserve, the European Central Bank, and the Bank of England have doled out bond-buying programmes, interest rate cuts, and currency swaps to tide over the crisis.
Some sceptics say these measures have helped improve sentiment, but one cannot say for sure if the markets have bottomed out.
"The latest bounce was after the markets saw a continuous fall of 30 per cent. After such a large fall, the markets tend to retrace upwards for the next few sessions. We may, however, see another sell-off after this retracement,” said Deeepak Jasani, head of retail research, HDFC Securities.
"The earnings momentum has been dented for the next two quarters and risk-on sentiment has shrunk globally. Hence, at higher levels, investors could relook at the valuations and may choose to reduce their equity holdings,” Jasani added.
Many experts have raised concerns about the spread of coronavirus in India and its possible economic impact. Concerns have also been raised about whether India's rickety public health infrastructure could cope with a spurt in the number of coronavirus cases. On Thursday, Prime Minister Modi urged citizens to stay indoors to protect themselves from the fast-spreading virus.
"Friday's rally was in sync with the Asian and European markets and was more of a relief rally driven by technicals rather than any fundamental change in outlook," said Vinod Nair, head of research, Geojit Financial Services. The India VIX index, a gauge for market volatility, cooled off by 7 per cent to 67 — a level still considered lofty.
Despite the rally 587 stocks hit their 52-week lows, and 351 were locked in the lower circuit on Thursday. The market breadth was slightly positive with total advancing stocks at 1,426 and those declining at 1,031 on the BSE.
All the Sensex components barring two ended the session with gains. ONGC was the best-performing Sensex stock and rose 18 per cent, thanks to the rebound in oil prices. Index heavyweight Reliance Industries rose 11 per cent. Nearly 12 Sensex components rallied 8 per cent or more. The two declining stocks were HDFC Bank and IndusInd Bank, which ended the session with losses of 1.4 per cent and 0.9 per cent, respectively. Both stocks, however, rebounded sharply from their intra-day lows.
All the BSE sectoral indices ended the sessions with gains. Energy and oil and gas stocks rose the most, and their gauges rose 10 per cent and 9 per cent, respectively. So far in March, overseas investors have pulled out nearly Rs 50,000 crore from stocks, pulling down the Sensex by 22 per cent. This is the worst month in history in terms of foreign flows.