Sensex nears 54k as lockdown rules eased

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MUMBAI: Smart gains in HDFC, TCS, Infosys and HUL propelled the sensex and the Nifty to new life highs on Tuesday as several states announced relaxation of Covid-induced lockdowns, raising hopes that the domestic economy could recover from the impact of the second wave quickly than was expected earlier. As a result, the sensex rallied 873 points or 1.7% to close at 53,823, while the Nifty closed at 16,131 points, up 256 points or 1.6%.
The strong buying in the market also pushed investors’ wealth to a new peak with BSE’s market capitalization now at Rs 242 lakh crore, or about $3.3 trillion.

The day’s rally was largely driven by large caps, while mid- and small-caps stocks underperformed, a note by domestic brokerage Motilal Oswal Financial Services said. In contrast to smart gains in benchmark indices, the Nifty midcap 100 Index was flat, while Nifty smallcap index closed -0.2% lower. Of the 30 sensex constituents, 27 closed with gains, while just three NTPC, Tata Steel and Bajaj Auto closed in the red.
Although a section in the market is cautious since the rally is yet to be supported by strong economic fundamentals, in the medium term the up move is expected to sustain. According to Amar Ambani, Senior President & Research Head, Yes Securities, the broking house maintains its Nifty target of 18,000 points by December 2021.
“Corporate balance sheets have been significantly strengthened with record equity raise in FY21. On the revenue front, the listed universe is on firm ground with accelerated trend of unorganized to organized, digital super-cycle and sustained cost management,” he said. “We expect the government to continue spending on infrastructure and fast track the reform agenda as we have seen with lowered corporate tax rates, PLI schemes, RBI (liquidity) support and strategic divestments. With accommodative financial conditions worldwide, we see the mega rally in risk assets to continue,” Ambani said.
On the other side, there are people who are cautious. There are at least three factors bothering marketmen, a dealer with a local brokerage said. For one, the rising Covid-19 cases around the world and its likely impact on global trade & economies is a cause for concern. In India, the rising interest rate with the benchmark yield on 10-year at 6.20%, up from 6.10% a month ago, is also a spot of bother. Lastly, the continuing foreign fund selling is also keeping people on the watch-out mode. In July, after recording a Rs 11,300-crore net outflow from stocks, the numbers are marginally positive for the current month, CDSL and BSE data showed.

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