Markets make sharp rebound, gain nearly 2% ahead of RBI policy
PremiumThe BSE Sensex ended gained 886.51 points or 1.56% at 57,633.65. The Nifty jumped 233.60 points or 1.38% at 17,145.85.
MUMBAI : Markets made a sharp rebound on Tuesday following a plunge previous day as strength in global equities boosted confidence. There was optimism in global markets on reports that the Omicron strain of covid 19 may not be as severe as expected. Rise in Indian benchmark indices on Tuesday is biggest single day jump since 23 September, 2021.
The BSE Sensex ended gained 886.51 points or 1.56% at 57,633.65. The Nifty jumped 233.60 points or 1.38% at 17,145.85.
Stocks across Asia-Pacific were mostly strong. Hong Kong’s Hang Seng jumped 2.72% while Japan’s Nikkei 225 gained 1.89%.
According to Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services Ltd equity markets witnessed a share rebound today, on back of positive global cues. “Comments from the US stating that the new virus might be less effective than earlier feared helped elevate global sentiments. Buying was witnessed in banking metals and auto stocks ahead of the RBI meeting on interest rates," he said.
However, he added that while markets have seen some relief today, the overall volatility is likely to remain for some more time until foreign institutional investors (FIIs) selling reduces.
India volatility index or India VIX slumped 8% ending at 18.46 on Tuesday. This follows a rise of 9% of India VIX on previous day. Analysts believe that markets have priced in a favourable monetary policy review by the Reserve Bank of India and hence the recovery.
“The upmove in markets shouldn’t be attributed to the covid-related update alone. Markets are also discounting a dovish stance from the monetary policy committee (MPC) as the outcome of the meeting is scheduled on Wednesday. We expect volatility to remain high in the first half so it’s prudent to restrict leveraged positions and wait for further clarity," Ajit Mishra, VP - Research, Religare Broking Ltd said.
FIIs have continued to sell Indian shares worth $802 million in December so far, being net buyers of $4.73 billion equities in this year. Domestic institutional investors (DIIs) which include mutual funds, insurance companies, banks and pension funds have been buyers. They invested ₹8190.02 crore into Indian shares in December after pumping ₹30522.02 crore in 2021 so far.
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“While on-track recovery and above-target inflation make a case for policy normalisation, authorities are likely to be watchful of the new risk on the horizon – the Omicron variant, said Radhika Rao, Senior Economist, DBS Bank.
She still expects a gradual exit from the ultra-accommodative policy settings to continue. “Taking cues from the recent liquidity management moves (longer-tenor auctions), policy corridor settings are due to be tweaked with a 20 basis points (bps) increase in the reverse repo rate, likely to be followed by a 20bps hike in February. Inflation risks cannot be dismissed as the moderation in September-October inflation is likely to be followed by an updrift back above 5.5-6% in Q12022, she added.
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