Sensex, Nifty rally on global cues, but see worst fall in 11 years in FY20
Benchmark index BSE Sensex ends at 29,468.49, up 3.62%, while the Nifty closes at 8,597.75, up 3.82%Positive global cues, mainly over improvement in data from China, lifted investor sentiments
Indian stock markets ended nearly 4% higher on Tuesday, mirroring the confidence in global markets after Chinese manufacturing activity rose. The BSE Sensex ended at 29,468.49, up 1,028.17 points or 3.62%, while the 50-share index Nifty closed at 8,597.75, up 316.65 points or 3.82%.
Markets in other parts of Asia were mostly firm. China, Hong Kong and Korea edged higher, while Japan and Australia ended lower. China on Tuesday said its official manufacturing PMI for March was at 52, indicating an expansion and defying expectations of a contraction.
Analysts polled by Reuters had expected the figure to come in at 45 for the month.
PMI readings below 50 point to a contraction, while figures above that level indicate an expansion.
According to Ajit Mishra, vice-president, research at Religare Broking Ltd, positive global cues, mainly in response to improvement in China’s manufacturing data, lifted investor sentiments, which led to buying in the Indian markets despite the rise in coronavirus cases.
The India volatility index, or VIX, also fell 10.29% to end at 64.49 on Tuesday, which could indicate that probably there may be some respite in the sharp sell-off in Indian markets.
However, the financial year 2020 that ended on Tuesday saw the steepest market fall in 11 years. Benchmark indices Sensex and Nifty lost 23.8% and 26.03%, respectively, in FY20, the worst since FY09.
The markets slipped considerably towards the end of the fiscal, with benchmark indices falling over 20% in March alone as the number of covid-19 cases increased in India and a mandatory 21-day nationwide lockdown disrupted life and business.
For smaller stocks too, it was one of the worst years since FY09. In FY20, BSE Midcap index lost 31.72% and BSE Smallcap 36.06%.
Until the spread of covid-19 is curbed, market sentiment is likely to remain fragile, analysts said.
According to analysts at Nomura, fears of an escalation, given the scenario in some European countries, have severely impacted market sentiment and hence, volatility is expected to remain extremely high in the near term.
“In the near-term, in case the covid-19 outlook in India improves, we expect a bounce-back in high-beta sectors such as financials that underperformed in the fall. From a one-year perspective, we remain selective as growth falters materially," Nomura said.
For other asset classes too, it was a year of significant losses. The Indian rupee was down 8.46% in FY20 while Brent crude was down by a massive 66.42%. In FY19, both rupee and Brent crude were down 5.7% and 2.6%, respectively.
Foreign institutional investors bought Indian shares worth $390 million in FY20, the lowest in four years. Domestic institutional investors, including mutual funds and insurance companies, pumped in ₹1.25 trillion in this fiscal, the highest in at least a decade.
Analysts feel the impact of covid-19 on gross domestic product (GDP) growth would be front-loaded and much depends upon the period of lockdown, the extent of economic disruption affecting productivity and the policy response related to all aspects, including medical and public health, administrative, economic, financial and regulatory.
“The moderate recovery of 5.5% expected in FY21 was meant to be achieved in 19 days while attaining the FY20 level of production by remaining 346 days of the year. This calculation is significantly upset post covid-19 now," said ASK Wealth Advisors Pvt Ltd.
Ravindra Sonawane contributed to the story
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