NEW DELHI: As the focus of investors turned away from rising bond yields and towards economic reopening, benchmark equity indices recouped all of the losses sustained during last Friday’s correction in three days. Sensex is again eyeing lifetime record high levels.
After falling over 1,900 points last Friday, Sensex has zoomed 2,300 points so far this week. Nifty has seen a similar jump that helped it reclaim 15,000 level.
“The stabilization of US 10-year bond yields at around 1.4 per cent has, for now, removed the fear of massive capital outflows. FIIs are back. Short covering and renewed buying in FII’s favourite stocks have again brought the bulls back,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Moreover, activity in India’s dominant services sector expanded at its quickest pace in a year in February, helped by an increase in new orders and optimism generated by the rollout of vaccines to fight the pandemic.
“Markets are likely to be excessively volatile, globally as well as in India. Inflation is likely to rise, bond yields may again rise, though mildly, and the Fed will continue to be accommodative. Along with this, India Inc will continue to report good numbers while market valuations continue to remain elevated. The perfect setting for choppy markets,” said Vijayakumar.
The IHS Markit Services Purchasing Managers’ Index (PMI) rose to 55.3 last month from 52.8 in January. The IHS Markit India Composite Index climbed to a four-month high of 57.3 in February.
“Participants are taking comfort from the domestic factors such as decent macro data, earnings upgrades and steady progress of vaccine drive. Importantly, Nifty has reversed the last week’s decline and indications are pointing towards a further surge ahead,” said Ajit Mishra, VP – Research, Religare Broking. “We remain cautiously optimistic on the markets and suggest focusing more on the selection of trades.”
Positive commentary from government think tanks have also helped build the confidence of investors. Likhita Chepa, Senior Research Analyst at CapitalVia Global, said traders remain energized, as former Niti Aayog vice chairman Arvind Panagariya said that India’s economy is on an ‘upswing’ and the government’s plans for increased spending comes in the backdrop of pro-growth reforms.
Meanwhile, many banks and financiers have reduced interest rates on home loans, which has fueled rally in the respective stocks. Any rise in the pack helps indices as financials hold 40 per cent weightage in Sensex and Nifty.
Technically as well, the setup is bullish. Nifty has filled the downgap made on Friday, though it took longer for the gap to be filled. Now the all-time high of Nifty is in sight — barely 186 points away. “With momentum on its side, there may not be too many impediments in Nifty achieving this over the next few days,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
Published at Wed, 03 Mar 2021 13:52:17 +0000