Taking Stock: Biggest single-day gain, Sensex back above 30K; what should investors do?

After two sessions of steady decline, the bulls managed to push the Indian market above crucial resistance levels on April 7 as signs of progress against the coronavirus in both Europe and the United States lifted sentiment.

The Sensex rallied more 2,400 points to reclaim 30,000, while the Nifty50 also reclaimed 8,700 for the first time since March 17.

The market recorded its best single day gain in percentage terms since May 2009, CNBC-Tv18 reported. The rally was the biggest ever single-day gain in absolute terms.

Let’s look at the final tally on D-Street: the Sensex rose 2,476 points, or 8.97 percent, to 30,067 while the Nifty rose 708 points to close at 8,792.

The rally was fierce and was seen in all sectors, with the Bankex and Energy gaining more than 10 percent each.

Hopes of inflows of over $1billion added to investor sentiment. Morgan Stanley expects MSCI India's weight in EM to rise by 55bps and India's FIF to rise from 0.39 to 0.42.

“We estimate slightly lower than a third of current constituents will see an increase in their stock weights whenever MSCI considers this particular rebalancing. In our estimates, this would imply passive inflows of US$1.3bn,” the report added.

The top five beneficiaries of this change are L&T, Asian Paints, Bajaj Finance, Nestle India, and Divis’s Laboratories.

''Even as the GoI chose to save lives at the cost of livelihood, markets showed no mercy and finally, the bulls took the bears to task today with a salute of more than 700 points on the Nifty," S Ranganathan, Head of Research at LKP Securities told Moneycontrol.

"MSCI changes, under ownership in pharmaceuticals and support from financials, culminated the stellar day in favour of the bulls," he said.

Investors’ wealth rose by Rs 8 lakh crore in a single trading session as the average market capitalisation of the BSE-listed companies rose from Rs 108 lakh crore recorded on April 3 to Rs 116 lakh crore on April 7.

Indian market witnessed a relief rally on D-Street but it will be difficult to say that the market will head in single direction and that is on the upside. It is a holiday-shortened week and news about rise in coronavirus cases could lead to more volatility on D-Street.

Investors are also awaiting an ease in lockdown procedures so that companies can get down to business but initial reports suggest that the lockdown could be extended.

If the momentum continues, the Nifty50 may head towards 10,500 and investors should use dips to get into quality stocks with an investment horizon of three years.

“Indian equities are significantly up today following positive cues from global markets, consecutive days of decline in intensity of COVID-19 cases and reports from banking sector on healthy growth in advances as well as comfortable deposit position,” Amar Ambani, Senior President and Head of Research Institutional Equities at YES Securities, told Moneycontrol.

“However, this big up move is on a smaller base vis-à-vis where markets were around three months back. A rally on the Nifty to 10,500 is possible in the next four weeks, where it will face still resistance.”

Ambani further added that the year 2020 will continue to see high volatility even in the aftermath of the health crisis. It will be a great time to lap up stocks with a three-year horizon but only after sufficient liquidity is kept aside for emergencies.

Technically, the index closed just a shade below 8,800 with gains of nearly 9 percent forming a bullish candle on the daily chart. The initial resistance is seen at 9,000, and in case the index manages to close above this level, then the outlook could change from negative to neutral.

“The index has a strong resistance near 9,000-mark once the Nifty managed to surpass the 9k level, we may see some change in momentum from negative to neutral, if failed to hold above 9k mark then we may again see pressure towards immediate support of 8,550-8,400 zone,” Rohit Singre, Senior Technical Analyst at LKP Securities told Moneycontrol.

“The Nifty Bank closed a day with gains of nearly 11 percent forming a small bullish candle after continuous red candles, immediate support for the Nifty Bank is coming near 18,500-18,000 zone and resistance is coming near 19,450-19,700 zone,” he said.

Sectorally, the S&P BSE Bankex rose 10 percent followed by the S&P BSE Energy, which was up 10.02 percent, and the Auto Index rallied 9.49 percent.

Long buildup was seen in Godrej Properties, Chola Finance and Ramco Cements.

Short buildup was seen in stocks like Cummins India, Bandhan Bank, and Bharat Forge.

The volatility index India VIX fell nearly 6 percent to 52.06, a positive indication for the bulls.

There are more than 30 stocks on the BSE, which hit a fresh 52-week high. It includes Nestle India, GSK Consumer Health, Dr Reddy’s Laboratories, HUL, Torrent Pharma, and Ipca Laboratories.

Godrej Properties: The share rose 15 percent after the company reported 100 percent sequential growth in its Q4FY20 booking.

IndusInd Bank: Shares surged 22 percent after the bank reported robust business operations for the quarter ended March.

JSPL: The share surged 28% after promoters announced to repay loans and get pledged shares released.

Dr Reddy's Lab: The share was up 14% after the government lifted partial ban on exports of hydroxychloroquine medicines.

HDFC Bank: The share jumped over 10 percent after the bank's advances aggregated to approximately Rs 9,930 billion as of Q4 FY20, a growth of around 21 percent as compared to Rs. 8,194 billion as of 31 March 2019, it said in a regulatory filing.