Domestic markets surge as PM announces a special task-force to protect the economy
Indian equity markets jumped on Friday to shoot up nearly 6 per cent, lifted by IT stocks, the top performers of the day.
The equity markets saw choppy trade at opening, but gained nearly 1% immediately after in early trade.
Following four sessions of bruising losses, Indian stocks staged a smart recovery with heavyweights Reliance Industries, TCS and Infosys alone accounting for a gain of more than 600 points in the Sensex
The Nifty IT index closed up 8.5%.
The S&P BSE Sensex index jumped as much as 1,627.73 points to touch 29,915.96, and the broader NSE Nifty 50 benchmark – which started the day at 8,284.45 – climbed to as high as 8,745.45, up 483 points from the previous close.
The equity markets snapped their devastating losing streak after the government announced the establishment of a special task-force to protect the economy from the fast-spreading coronavirus outbreak.
The task force would ensure that all necessary steps were taken to reduce the economic difficulties arising out of the crisis that the country was facing due to coronavirus.
Will the optimism in markets last?
Today’s gains in Asian and US markets also supported Dalal Street’s optimism.
Economies across the world are preparing relief measures for affected businesses and individuals. The US Senate was debating a $1 trillion economic stimulus plan that would include direct financial help for Americans, relief for small businesses and steps to stabilise the economy. India is also considering such a step.
The Reserve Bank of India’s move to buy government bonds worth Rs 30,000 crore in March is welcomed. Investors will be encouraged after seeing more steps by the RBI and the government to support the economy.
However, as online traders we are apprehensive regarding the sustainability of
the rally amid the accelerating pandemic as nationwide lockdowns, travel
restrictions and the mounting human toll from the pandemic is beginning to stretch
finances across industries.
Stock Exchanges to remain open
The total number of coronavirus cases in India rose to 195 after over 35 new cases, highest in a single day, emerged from across the country.
Prime Minister Narendra Modi has urged India’s citizens to stay indoors to protect themselves from the fast-spreading coronavirus.
Even as the total number of coronavirus cases in Maharashtra climbed to four, the chief minister’s office said on the micro-blogging and social networking website Twitter that stock exchanges, clearing corporations, depositories, stock brokers and Securities and Exchange Board of India (SEBI)-registered participants operating through these institutions will be exempted from the state government’s order to shut down all non-essential workplaces until 31 March.
Rupee recovers
Meanwhile, the Indian Rupee appreciated by 34 paise to trade at 74.78 against the US dollar in early deals on Friday following dollar selling by exporters. On Thursday, the rupee had fallen to 75.31 against the dollar.
With investors selling currencies, bonds and stocks in Asia to pile into the world’s reserve currency, the dollar also surged against other Asian currencies. The US dollar index rose to a record high of 102.12.
The risk-off sentiment continues to dominate over rising worries that the global economy could be headed towards recession this year as a result of the coronavirus pandemic.
At Wisdom Capital, we believe the rupee’s sharp fall is the result of huge foreign investment outflows on the back of falling indices. This month FIIs have sold $5.12 billion in debt and $4.94 billion in equities. We are of the opinion that continued FII outflows may keep the Indian rupee under pressure. With the Reserve Bank of India assuring that steps will be taken to maintain sufficient liquidity, a currency crash may be avoided.
Crude Oil
US crude oil prices edged higher on Friday, extending gains after a 24% jump the previous day. This development comes after US President Donald Trump hinted he may get involved in the oil price standoff between Saudi Arabia and Russia at an “appropriate time”.
Gold price edges higher
After hitting a record high earlier this month, gold prices in India today edged higher but still remained significantly off their recent highs. On the Multi Commodity Exchange (MCX), gold futures gained 0.4% to ₹39,996 per 10 gram, extending gains to the second day.