Sensex crosses 51,000 after 3 months, Nifty nears record

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Markets ended higher on Wednesday as aggressive buying drove the Sensex above 51,000 for the first time in nearly three months as the Nifty moved closer to its all-time high. A drop in the daily number of virus cases and improved recovery rates have bolstered investor sentiment for a faster-than-expected economic recovery earlier. BSE Sensex climbed 379.99 points or 0.75% to 51,017.52. All 30 stocks were last closed above 51,000 on March 10.

The Nifty is nowhere near its all-time high just by a hairline, ending at 15,301.45, up 93 points or 0.61%. It previously peaked at 15,431.75 on February 16.

Binod Modi, Head of Strategy at Reliance Securities, said: “Domestic stocks remained bullish as improved visibility into the economic recovery from the second quarter of FY22 continued to strengthen sentiment among investors. investors. In addition, strong fourth quarter fiscal21 results and favorable management comments also helped to uplift sentiment. Going forward, the likely announcement of the phasing out of state-level lockdowns in the coming weeks and the resumption of economic activity can potentially help the market support the recovery in the short to medium term. “

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He said sagging US bond yields and the weakness of the dollar index may provide additional comfort, which may essentially lead to the flow of foreign institutional investors (FIIs) turning favorable. Investors will continue to focus on the trajectory of the daily number of cases and the acceleration of vaccination in the country in the short term. FIIs are still net sellers of Indian equities, but the pace of sales is slowing. The FII have tossed Indian stocks worth $ 232.61 million this month so far. National institutional investors have invested 938.44 crore in Indian stocks in May.

The optimism, however, comes at a time when economic activities have been hit hard by the regional lockdown and economists have cut their gross domestic product (GDP) forecast for fiscal 22 by several notches.

The Nomura India Resumption to Activity Index (NIBRI), which tracks various high-frequency data, fell to 60 for the week ending May 23 from 63 the week before, to levels last seen in June 2020 after fully recovering in February. Sonal Varma and Aurodeep Nandi, economist at Nomura, believe that the continued sharp decline in the index indicates that the worst impact on activity will occur in May.

“Locks appear to be spreading through June, but a few states are announcing a slow rollback of restrictions as their virus counts decline, suggesting a sequential improvement in activity in June. For a sustainable recovery, the pace of vaccination must also accelerate, which should happen after June, ”said Varma and Nandi.

Barclays economists fear that slow vaccinations and phased lockdowns are weighing on India’s recovery. Barclays further reduced its GDP forecast to 9.2% in fiscal years 2021-22, a reduction of 80 basis points. They estimate that a third wave in India will increase economic costs by at least an additional $ 42.6 billion, assuming another equally stringent round of lockdowns are imposed for eight weeks. If India is hit by a third wave, Barclays estimates FY22 GDP will be further reduced to 7.7%.

Meanwhile, the Indian Volatility Index or VIX rose 10.77% to 20.87, indicating that investors are anxious and nervous about the future of the markets.

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