Sensex shrugs rise in covid-19 cases, regains 60,000 mark

Indian shares gained for the fourth straight day on Wednesday, undeterred by the surge in covid cases threatening to crimp economic activity.

Expectations that the Reserve Bank of India (RBI) may delay an expected increase in interest rate next month following the fresh wave of infections have also added to investor optimism.

The benchmark BSE Sensex reclaimed the 60,000 mark for the first time since 17 November. The 30-share index gained 367.22 points or 0.61% to close at 60,223.15. The Nifty climbed 0.67% to 17,925.25.

“The domestic market witnessed a recovery following a mild dip though the global sentiments were not in favour of bulls. Increasing covid cases leading to stricter restrictions has pressurized market volatility,” said Vinod Nair, head of research, Geojit Financial Services.

“The banking sector outshone other sectoral indices as few private lenders reported double-digit business growth in the third quarter. IT stocks took a blow as investors awaited the onset of the quarterly results season,” Nair said.

Other Asian-Pacific markets were largely lower as higher US Treasury yields weighed on global tech firms and pushed the dollar to a five-year high against Japan’s yen. US yields rose on Tuesday as bond investors geared up for interest rate hikes from the Federal Reserve by mid-year to curb stubbornly high inflation, Reuters reported.

Hong Kong’s Hang Seng index fell 1.64%, the Shanghai composite in China slipped 1.02%, while in South Korea, the Kospi dropped 1.18%.

Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services Ltd, said global markets remained subdued, with US Treasury yields trending higher as investors await the minutes from the Fed.

However, he is optimistic on Indian equities, expecting the Nifty to deliver 12-15% returns in 2022, supported by the continuation of economic recovery and strong earnings growth.

“After the recent correction, Nifty is trading at 20 times 12-month forward price-to-earnings (PE), which is no longer in expensive zone. While the market trend might be volatile on account of the risk from the Omicron variant, the budget and fragile global cues, strong earnings delivery, along with positive macroeconomic data, would hold the key to drive markets upwards,” Khemka said.

However, the India volatility index or India VIX climbed 6.87% on Wednesday, indicating a gradual increase in anxiety and nervousness.

With Wednesday’s rise, Sensex and Nifty have gained more than 3% each since the start of this year.

Foreign institutional investors (FIIs) have resumed buying Indian equities, turning net buyers of shares worth $493.66 million in 2022 so far, after draining out $4.76 billion in the last quarter of 2021. Domestic institutional investors have pumped ₹1,336.08 crore into stocks in January so far.

Aditi Nayar, chief economist at ICRA Ltd, said it is increasingly unlikely that RBI will start policy normalization in February unless inflation offers an acutely negative surprise. “The impact of an Omicron wave may be limited to one quarter... The impact on GDP will depend on the extent to which curbs need to be extended. As of now, we see a modest downside to our forecast of FY2022 GDP expansion of 9.0%,” she said.