The surge in Covid cases continues to be a concern for the economy and markets. However, the saving grace is that since the lockdowns and restrictions are sporadic, the impact on the economy will be insignificant, said an analyst.
“Investors can hedge against the uncertainty surrounding the second wave with reduced exposure to economy-facing stocks and higher exposure to IT, pharma & FMCG segments. Rupee depreciation is another tailwind for IT. A distinct trend in the market is the outperformance of mid-small-caps, which is likely to continue,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
FACTORS DRIVING MARKETS
Good News
- Fed minutes: Minutes of the Federal Reserve’s last policy meeting showed members felt the economy was still far short of the target and were in no rush to scale back their $120 billion a month of bond buying.
- RBI policy meet: Reserve Bank of India’s rate-setting panel maintained status quo. The central bank also announced a flurry of announcements to infume more liquidity in the market.
- Yields fall: Yields on 10-year Treasuries have since eased back a little to 1.667 per cent, from the recent 14-month top of 1.776 per cent, but have struggled to break under 1.59 per cent.
Bad news
- Rupee depreciation: The RBI’s stance on maintaining an ultra-loose monetary policy, along with liquidity infusion amidst rising Covid cases, weakened Indian rupee by 1.5 per cent on Wednesday, its biggest intraday fall since August 2019. Accordingly, the rupee closed at 74.55 to a dollar. Rupee and equity has positive correlation.
- Covid rampage: With over 1.25 lakh new Covid-19 cases on Wednesday, India recorded its highest single-day spike since the beginning of the pandemic last year. Maharashtra alone reported nearly 60,000 cases.
How are the blue chip stocks doing?
After opening in the green, benchmark indices maintained their lead. At 9:44 am, BSE flagship Sensex was up 354 points or 0.73 per cent to 50,026. NSE benchmark Nifty followed and gained 113 points or 0.76 per cent to 14,932.
In the 50-share pack Nifty, Hindalco was the biggest gainer, up 2.65 per cent. Tata Motors, Tech Mahindra, Grasim Industries, Tata Steel, Bajaj Finserv, Shree Cement and TCS were among other gainers.
ONGC was the top loser in the pack, down 0.81 per cent. SBI Life Insurance, Bajaj Auto, Dr Reddy’s Laboratories and Reliance Industries were other losers in the pack.
Broader markets
Broader market indices were trading with gains outperforming their headline peers in morning trade. Nifty Smallcap was up 1.14 per cent while Nifty Midcap added 0.65 per cent. Broadest index on NSE, Nifty 500 was up 0.70 per cent.
Dhani Services, Dixon Technologies, Ashok Leyland, Graphite India, HEG INfra and Route Mobile were gainers from the space while Hindustan Copper, Future REtail, UTI AMC, Adani Total Gas, Gujarat State Petronet and IRCTC were under selling pressure.
Global markets
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, and also little changed on the week. Japan’s Nikkei eased 0.3 per cent and Chinese blue chips 0.1 per cent , with trading very subdued.
The outperformance of the US economy helped S&P 500 futures add 0.3 per cent to a new peak, while Nasdaq futures gained 0.4 per cent. EUROSTOXX 50 futures firmed 0.2 per cent and FTSE futures 0.3 per cent.
