Markets up 4% after positive Chinese economic data raises revival hopes

Topics Sensex | Nifty | Coronavirus

Experts said the markets will continue to witness wild swings as the number of coronavirus cases climb
The Indian markets jumped nearly 4 per cent on Tuesday, recouping most losses in the previous session, after the positive Chinese economic data raised hopes of a revival in the global economy, which is undergoing a shutdown to combat the spread of the coronavirus contagion.

The Sensex gained 1,028 points, or 3.6 per cent, to end at 29,468, while the Nifty50 gained 317 points, or 3.8 per cent, to end at 8,598. On Monday, both indices had declined 4.5 per cent.

China’s official Purchasing Managers’ Index (PMI) rose from 35.7 in February to 52 in March. This was above the consensus estimate from analysts. Any reading above 50 indicates growth compared to the previous month. China has been encouraging its companies to restart production amid restrictions. Also, hopes that global pharma giants will be able to ready a possible Covid-19 vaccine in record time kept sentiment positive.

Experts, however, said the markets will continue to witness wild swings as the number of coronavirus cases climb and many nations remain in the state of lockdown.

“The issue is that the epicentre of the problem does not lie in the financial system. When economic activity is underway, stimulus acts as a leverage multiplier. When activity itself is on the decline, on account of social distancing, the stimulus may not have the same multiplier effect. I wouldn’t rule out the market re-testing the lows hit recently,” said Amar Ambani, senior president and institutional research head, YES Securities.

 

 
The Nifty index had dropped to a four-year low of 7,610 last week. Since then, it has rebounded 13 per cent because of frantic buying in beaten-down blue-chip stocks.

Some said Tuesday’s rally could be on account of so-called net asset value (NAV) propping by institutional investors. “The Nifty reversed Monday’s losses. We can call it a yearly and quarterly NAV management day for the market. Many large-cap stocks closed at the day’s highest level,” said Shrikant Chouhan, executive vice-president, equity technical research, Kotak Securities.

Entities, such as mutual funds which managed pooled funds, have to publish returns as on last date for the quarter or year.

Reliance Industries, HDFC Bank, HDFC, and ITC contributed more than half of the gains in the Sensex. Overseas investors sold shares worth Rs 3,045 crore, while net-buying by domestic investors stood at Rs 3,576 crore. Monthly foreign outflows from equities at nearly Rs 60,000 crore in March was the highest ever. “The global markets are doing better than expected but our markets are trading cautiously because of consistent selling by foreign institutions,” said Chouhan.

The market breadth was positive, with total advancing stocks at 1,522 and those declining at 773 on the BSE.


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