Nifty up 20% from March low when COVID-19 cases were 500; what is driving rally?

The Nifty50 hit a swing low of 7,511 on March 24 when COVID-19 related cases in India were reported to be just 519, according to India COVID-19 tracker. The index since then rallied by about 20 percent to hit 9,000 levels on April 13 while a multi-fold increase was seen in COVID-19 related cases.

COVID-19 related cases spiked to over 9,000 from 519 as on March 24, a jump of more than 1,600 percent. While there is no direct correlation between the rise in the number of COVID-19 cases and the rally on D-Street, but experts feel that the market is taking comfort in the fact that global cases have somewhat reduced.

Fall in new cases especially in the US, as well as UK and expectations of further stimulus from the government across the world including India, is fuelling a rally.

“The global market recovery has been driven by the fact that investors now have begun to focus on recovery. News flows such as the announcement of economic stabilisation packages by key countries and stabilisation/fall in the number of new cases in Europe which may be implying the flattening of the curve there has been a key catalyst of overall global equity market recovery,” Pankaj Pandey, Head of Research at ICICI Securities told Moneycontrol.

“Furthermore, at the India level, an indication of phased exit also provides some visibility of resumption in certain pockets of the economy. Sustainability of the rally, however, would hinge on follow-up in the number of new COVID-19 cases in India (stable trajectory so far) as well as globally which would eventually determine the timing of economic activity resumption,” he said.

The total number of cases across the globe rose from over 4 lakh as on March 24 to over 18 lakh currently. In the month of April, the cases doubled, globally, but new cases, especially for the US, dropped significantly.

Daily new cases for the US peaked on April 3 when it hit over 34000 and since then they have fallen towards 27,000 new cases per day, according to Worldometers, a website tracking COVID-19 related cases across the world.

Markets across the world are taking comfort in the fact that new cases are coming down especially in the US and UK. Apart from the fall in the new cases, and expectation of stimulus measure from the central bankers has also lifted sentiment.

Last week, European Union finance ministers agreed on Thursday on half-a-trillion euros worth of support for their coronavirus-battered economies but left open the question of how to finance recovery in the bloc headed for a steep recession, said a Reuters report.