The benchmark indices gained on Tuesday amidst earnings optimism. However, the gains were subdued as Omicron concerns and the timing of the US Federal Reserve's (Fed's) rate hikes weighed on investors' minds.
The benchmark Sensex ended the session at 60,617 - a gain of 221 points, or 0.4 per cent. The Nifty, on the other hand, ended the session at 18,055 - a gain of 52 points, or 0.3 per cent.
Analysts said investors expect strong earnings, especially those announcing their earnings initially. However, some companies will see margin pressures due to high commodity costs.
"We are in the fourth week of rebound. All eyes are on the earnings of three information technology majors. We reiterate our positive yet cautious view on markets and suggest focusing more on sector/stock selection," said Ajit Mishra, vice-president (research), Religare Broking.
The Union health ministry's statement that only 5-10 per cent of active Covid cases will need hospitalisation this time also enthused investors looking for some additional information to price the economic impact of the current wave.
Markets across the globe are grappling with a rise in Covid cases after the emergence of the Omicron variant, and the sudden U-turn of central banks that have prioritised fighting inflation after terming it as a transitory phenomenon for most of last year.
The low-interest rates and aggressive bond purchases by central banks, including the Fed, helped the emerging markets post huge gains after March 2020.
"Investors continue to monitor the impact of central banks tightening their monetary policies, and the spread of the Omicron variant. In the previous two decades, there have been two periods when the Fed had raised interest rates (June 2004-June 2006) and (December 2016-December 2018). The Nifty has performed well in those two periods, despite rate increases by the Fed. Going forward, we expect the market to remain steady on the back of an expectation of a strong corporate earnings season, upcoming Budget, and positive macroeconomic data. The key risk in the near term might be any changes by the government in imposing restrictions due to rising cases," said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services.
The market breadth was positive, with 1,914 stocks advancing and 1,531 declining on the BSE. Around 615 stocks hit their 52-week highs, and 728 were locked in the upper circuit. More than half of the Sensex constituents gained.
HCL Technologies was the best performing Sensex stock and gained 4.3 per cent; HDFC gained 1.9 per cent, and Tech Mahindra gained 1.3 per cent.
More than a dozen sectoral indices on the BSE ended with gains. Power and utility stocks gained the most, and their indices ended the session with 1.8 and 1.7 per cent, respectively.
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