Relief Rally: Stock markets roar back to life smartly

By: |
Published: March 26, 2020 5:45:55 AM

Following measures announced by the market regulator, volumes and volatility have come down. The India Volatility Index (VIX) declined and ended the day at 76.9%.

Even as market experts believe that some of the stimulus will end up in emerging markets, the pain is not yet over for Indian markets, which are down 36% from their recent peak.Even as market experts believe that some of the stimulus will end up in emerging markets, the pain is not yet over for Indian markets, which are down 36% from their recent peak.

The stock markets roared back to life on Wednesday with the Sensex rallying by a smart 1861.98 points (6.98%) to close at 28,535.78 points. The broader Nifty50 rallied 516.8 points (6.6%) to end the session at 8,317.85 points, marking its single biggest one-day gain in percentage terms. Foreign portfolio investors, however, remained net sellers to the tune of Rs 1,893 crore. Bank stocks were big gainers. While Morgan Stanley is of the view the bear market may be nearing its trough, others are calling it a relief rally.

The relief rally was driven by the big moves seen in Reliance Industries (+13.84%) and HDFC Bank (+12.41%), which contributed 1000 points in the Sensex’s rise. Indian shares took cues from global markets which were all in the green, with the Dow Jones Industrial Average rising 11% on Tuesday, after the US reached an agreement on the $2 trillion stimulus package.

Even as market experts believe that some of the stimulus will end up in emerging markets, the pain is not yet over for Indian markets, which are down 36% from their recent peak. Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies, called Wednesday’s rise a relief rally. “The stimulus package announced by the US and the expectation of our own stimulus package will lend stability. I am not looking for a bottom but stability in the markets,” he said.

Going by the rules of bear markets, which tend to last more than six months during which markets shed up to 60%, Indian equities may not be near a bottom yet with 36% decline. Morgan Stanley said in its strategy note that the price decline of around 40% leaves some more downside risk on the table when compared with past bear markets. If not the bottom, the foreign investment bank is of the view that the bear market may be near its trough.

Following measures announced by the market regulator, volumes and volatility have come down. The India Volatility Index (VIX) declined and ended the day at 76.9%.

According to Umesh Mehta, head of research, Samco Securities, the market has reached a short-term bottom. “A short term bottom is basically when stock markets have witnessed panic selling. If after few weeks markets trade flat, less stocks participate in rally, FPIs still continue to sell, we may see another down let, but for the moment we should see stability in prices,” said Umesh Shah, head of research, Samco Securities.

Bourses in South Korea, Hong Kong and China traded in the green taking their cues from Dow Jones which closed making gains in the previous day’s trade. The European markets too, were off to a positive start. Reliance Industries was up 13.8%. With the single biggest day gain since 2008, it was the top gainer on Nifty. According to market experts, Reliance Industries was up on the speculation of a block deal. HDFC Bank and Kotak Mahindra Bank were up 12.4% and 11.8% respectively. UPL and Maruti Suzuki rose by 11.4% and 10.5%, respectively. The biggest losers on the Nifty were IndusInd Bank, Indian Oil Company, Coal India, Wipro and Gail down by 3.3%, 3%, 2.8%, 2.1% and 2%. Titan was up by 10% and posted its biggest single day gains in 16 months.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Investor wealth rises by Rs 6.63 lakh cr in two days of market rally
2NBFC shares immune to Coronavirus? Three stocks that may gain up to 63%, beat downfall
3ICRA says Yes Bank still requires up to Rs 13,000 crore in 1-2 years, upgrades various bond programmes