Sensex and Nifty ended at 3-week closing highs on Thursday, led by robust buying in pharma, auto and FMCG stocks on hopes that the coronavirus pandemic was nearing its peak globally.
Sensex closed 1,265 points higher at 31,159 and Nifty ended 363 points higher at 9,111. On a weekly basis, both Sensex and Nifty added around 13 per cent.
Mahindra and Mahindra, Maruti, Titan, Bajaj Finance, HDFC, Bajaj Auto and Hero MotoCorp were among the top gainers of Sensex pack, while HUL, Tech Mahindra, IndusInd Bank and Nestle were among the top laggards.
1. Strong global cues
Benchmarks opened higher on Thursday tracking rally in global key equity indices on hopes of the COVID-19 pandemic approaching its peak. Investors globally turned optimistic over prospects of slowing pace of fresh COVID-19 cases amid the tightened lockdowns across the world by governments.
Globally, markets turned positive, tracking Wall Street's gains after the US President tweeted that New York is starting to flatten its curve of the number of coronavirus cases. Investors put faith in signs that the spread of the coronavirus is stabilising in hard-hit locations as countries closed their borders and urged citizens to stay back home as a part of coronavirus measures.
In European markets, both FTSE and DAX grew almost 1%, although CAC traded marginally lower. In Asia, bourses in Shanghai, Hong Kong, and Seoul ended on a positive note, while Tokyo closed in the red.
"Indian markets in sync with Global markets were up again today on expectations of infections peaking out and for more stimulus measures to be announced. This uptrend seems to be a short term market rally and may not be sustainable," said Vinod Nair, Head of Research at Geojit Financial Services.
2. Sector-based rally
It was a purely sector-based rally for the broader indices on Thursday, with auto, financials, pharma and FMCG stocks gaining the most.
S Ranganathan, Head of Research at LKP Securities said,"On the back of positive global cues, market rose led by spirited all-round buying as Automobiles, Financials and Pharmaceuticals led the charge despite profit booking witnessed. Today's trade saw even consumer discretionary and consumer durables stage a comeback ahead of expectations of a stimulus to help MSMEs weather the pandemic".
Auto stocks rallied today despite an auto sales slump. Pharma and FMCG stocks were also leading the rally as investors accumulated essential commodities stocks. In the last one month period, the pharma sector has risen 15%, followed by a 3% rise in FMCG. Nifty Pharma has risen 10.87% since the beginning of 2020.
At least 8 out of 15 stocks in Nifty auto closed 7% higher and 6 out of 10 stocks in Nifty pharma ended 6% higher.
3. Relief package hopes
Besides the strong global cues, hopes of another fiscal stimulus package from the government before the end of the lockdown period also kept market sentiments upbeat, experts suggested.
As per experts, investors awaited announcements on a second stimulus package from the government to mitigate the blow of the Covid-19 post the lockdown period. As of Thursday, the number of infected cases in India has increased to 5,916, with 506 recovered cases.
Vinod Nair, Head of Research at Geojit Financial Services said, "In India, there is speculation that the package may help worst affected sectors and MSMEs may get some relief in the package to be announced."
4. India VIX declines 5%
Volatility index India VIX declined over 5% to 49.56 levels today, suggesting falling volatility in market trend today. India VIX recently moved to its 11-year high, by rising 302.8% in the March series from 17.76 to 71.53 levels due to ongoing Coronavirus concerns.
As per Motilal Oswal, the index that measures intraday volatility is likely to maintain the volatile swing in the market and may not give smooth ride and comfort to the traders.
5. Technical outlook
Manav Chopra, CMT, Head Research - Equity, Indiabulls Securities said, "Nifty rallied on expected lines and closed above the resistance zone of 9,050. Momentum is likely to continue and our mentioned target of 9,300-9,500 is likely to get achieved. We have been contra bulls since 8,400 levels and had an aggressive target of 9,300-9,500."
On Nifty's near term outlook the MOFL stated, "Major support for Nifty is placed at 7500 and 6800 levels; while a sustainable move above its resistance of 9000-9300 zone would be a big challenge for the bulls to get the short-term stability."
Commenting on near term key events, Ajit Mishra, VP - Research, Religare Broking said,"IIP data for the February month would provide a sense of the impact of the virus led disruption on the manufacturing activity. Further, the outcome of the OPEC meeting will also be keenly watched by the market participants across the globe."
Since the beginning of the year, both BSE, NSE benchmarks have declined 25%, 24% respectively. Markets will remain closed tomorrow on account of Good Friday.