Domestic equity benchmarks Sensex and Nifty registered significant gains on Monday and ended near day's high, tracking positive cues from global equities. Reversing from major sell-off during last week, Sensex ended 749 points higher at 49,849 and Nifty gained 232 points to 14,761.
1. Positive economic data
Market participants reacted positively to encouraging Q3 GDP data and Markit Manufacturing PMI for February on Monday.
Indian economy reported growth in the December quarter after two-quarters of contraction and came out of recession with the Q3 GDP data turning positive with 0.4% growth.
The nation's Gross Domestic Product (GDP) saw a revival, albeit marginally, as economic activities resumed after a long and arduous lockdown and overall sentiment improved with the rollout of the vaccination drive. As per government data, India's GDP increased by 0.4 per cent during the third quarter ended December 31, 2020.
Similarly, IHS Markit India Manufacturing Purchasing Managers' Index (PMI) stood at 57.5 in February 2021, highlighting a strong improvement in operating conditions.
The output of eight core infrastructure sectors grew marginally by 0.1% in January, mainly due to growth in the production of fertiliser, steel and electricity. The core sectors had expanded by 2.2% in January 2020, according to the provisional data released by the Commerce and Industry Ministry on Friday.
Jyoti Roy - DVP- Equity Strategist, Angel Broking said," Indian manufacturing PMI for February at 57.5 remained at similar levels of 57.7 in January and points to continued improvement in the economy. The headline figure remained well above the long term average of 53.6. Continued improvement in the demand environment led to a further increase in new orders which led to a further increase in production and inventories. New export orders also continued to improve through the pandemic led supply chain disruptions did have some adverse impact on international demand for Indian goods. However, employment decreased further due to restrictions Covid restrictions related to shifting work while input cost inflation increased to a 32-month high. The February manufacturing PMI numbers corroborate our view that we are witnessing a strong rebound in the underlying economy which is expected to continue. While manufacturing has led the rebound so far, growth in the services sector too has started to improve and all eyes will be on the services PMI numbers which will be reported later during this week."
Meanwhile, Asian equities also ended strong on Monday, as data releases showed China's manufacturing activity growth slowing in February.
2. Bond markets stabilise
European shares jumped on Monday as key yields in the bond market calmed and fell from their recent highs amid signs of economic stabilisation. European equities had fallen to a near one-month low last Friday as investors grew fearful of rising inflation. The rise in yields also indicates a revival of economic growth.
In the US, the benchmark 10-year U.S. bond traded at 1.4153%, recovering from Thursday's one-year high of 1.614%.
S Ranganathan, Head of Research at LKP Securities said,"Positive global cues and US yields retreating from highs led to a strong opening today with Indices sustaining gains throughout the day."
Ajit Mishra, VP - Research, Religare Broking said,"Going ahead, the rising bond yields remain a key concern for equity markets worldwide. Although the recent Fed statements have been comforting."
3. US stimulus package cleared
Global sentiments sentiment were also boosted by heightened optimism over $1.9 trillion U.S. stimulus package. The House passed a $1.9 trillion Covid relief bill, the American Rescue Plan Act of 2021, early Saturday. The Senate will now consider the legislation.
Ajit Mishra, VP - Research, Religare Broking said," Markets started the week on an optimistic note and posted decent gains. The progress on the US stimulus package and stability in bond yields triggered a rebound in early trade, followed by range-bound movement till the end. Besides, participants also reacted to the GDP numbers, which showed marginal growth after seeing a contraction in the last two quarters. Healthy buying was witnessed across the board wherein auto, metals and power were among the top gainers. On the benchmark front, the Nifty index ended near day's high with strong gains of 1.6% to close at 14,762 levels. The broader markets too ended higher, in line with the benchmark."
4. Strong auto sales
Maruti Suzuki reported an 8.3 per cent growth in February sales while Hyundai registered 29 per cent growth . MG clocked its best-ever monthly sales with 215 per cent Y-O-Y growth. BSE auto index ended 532 points higher at 23,470. Nifty auto index 241 points higher at 10,411.
5. Covid-19 vaccine drive
Expansion of global COVID-19 vaccination programmes also drove markets today.
The newly approved Johnson & Johnson COVID-19 vaccine that will start in the United States on Tuesday also helped global indices. London markets also turned buoyed as data showed more than 20 million people across the United Kingdom received their first COVID-19 vaccine shot
Prime Minister Narendra Modi was inoculated with the first dose of a home-grown coronavirus vaccine on Monday. In India, the government has allowed people to choose their vaccination centres, effectively letting beneficiaries pick either the home-grown COVAXIN shot or the AstraZeneca vaccine.