"We believe investors will continue to take comfort from receding fresh daily cases. This indicates that the assumption of the second Covid-19 wave daily caseload peaking by the end of May or mid of June holds, and the adverse impact of the second wave should not be felt beyond Q1FY22," Binod Modi, head of strategy at Reliance Securities, said.
However, the rising death toll, slow roll-out of vaccination, and Covid spreading to rural areas are worrying, said experts.
Hopes of the US Federal Reserve not tightening its monetary policy immediately have also cheered investors. On Monday, US Federal Reserve Vice-Chairman Richard Clara said the job reports showed the economy had not reached the stage to warrant scaling back bond purchases. The reopening of economies boosting growth has counterbalanced concerns of rising inflation in the US.
Sentiments were also boosted by the weakening US dollar
against major global currencies. A weak dollar makes investing in emerging economies like India more attractive.
Experts said global developments would guide how the Indian markets move in the near term.
"Anything globally negative will have an impact at the moment. Until we get satisfactory vaccination roll-out, we are hostage to what happens offshore," said Holland.
As many as 312 stocks hit their 52-week highs, and 434 were locked in upper circuit on the BSE. The market breadth was positive, with 1,946 stocks advancing and 1,144 declining. Four-fifths of the Sensex constituents ended the session with gains. Mahindra & Mahindra rose 5.9 per cent, Bajaj Auto rose 5.1 per cent, and Titan rose 4.9 per cent. Barring two, all sectoral indices ended the session with gains. Auto and consumer discretionary goods and services stocks rose the most, and their gauges rose 3.2 per cent and 2.5 per cent, respectively.
The prospect of a good monsoon is expected to revive rural demand, and auto and consumer discretionary items are expected to benefit. The Bank Nifty index rose 1.4 per cent, adding its two-day gain to over 5 per cent.
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