Nifty reclaims 17,100 after 2 days in the red. Five factors turning markets green

Asia's Tech News Daily

#coronavirus, #markets, #Nifty 50, #Omicron, #Sensex, Check out the Parliament updates here., wrote in a note, Upbeat Economic Indicators

Market rally

The market is in fine fettle as the Nifty50 managed to reclaim the crucial 17,100-point mark on December 7, and the Sensex zoomed more than 800 points.

The Nifty50 hit an intraday high of 17,171.60 points, and at 11:18am, it was up 1.5 percent to 17,166.05 points. Similarly, the Sensex hit an intraday high of 57,642.24 points, and was last trading at 57,628.62 points, or 1.6 percent higher.

On the Nifty50, 43 out of 50 stocks were in the green, led by banks and metals.

Let’s chedck out the factors driving the market rally today:

  1. Easing Omicron Fears

Early studies of Omicron strain of COVID-19 cases have shown that even though the variant is fast-spreading, it is largely milder than the Delta variant of the virus. White House Chief Medical Advisor Dr Anthony Fauci also said that the initial data on the variant was “encouraging”. However, he cautioned that more information was needed to fully understand it. These developments have eased fears of strict lockdowns and disruptions to global economic activities once again.

  1. Upbeat Asian Markets

Riding on the positive developments, major indices on Wall Street gained on Monday, which triggered positive Asian cues on December 7.

While the Hang Seng was up 1.8 percent, the Kospi index rose 0.6 percent and the Nikkei 225 climbed over 2 percent. On the Hong Kong benchmark index, Tencent surged almost 3 percent and Alibaba jumped over 10 percent after shedding nearly 6 percent on Monday.

Check out the Parliament updates here.

  1. Short Covering and Value Buying

The indices rebounded after two days of selloff as participants followed a buy-on-dips strategy to pick up stocks at cheaper prices. All sectoral indices were in the green on Tuesday, with the rally being driven by banks, financial services and metals. While the Nifty Bank was up 2.4 percent, the Nifty Metal index rose 2.5 percent. Even the pharma index managed to eke out some gains after seeing losses in early trade. The volatility index, India VIX, also cooled off by nearly 7 percent to 18.6 levels.

Also read: MPC Meet Preview | Omicron uncertainty reaffirms underwhelming policy normalisation

  1. Eyeing the Monetary Policy

The Reserve Bank of India is expected to keep the interest rates steady when the Monetary Policy Committee announces the outcome of its meeting on December 8. Fifty economists surveyed by Reuters in a December 1-3 poll expect the RBI to hold its benchmark repo rate at 4 percent.

“We believe the RBI may deflate the hype around reverse repo hike in monetary policy by explaining the virtues of using reverse repo change as a pure liquidity tool and not a rate tool,” Soumya Kanti Ghosh, Chief Economic Advisor at the State Bank of India wrote in a note.

  1. Upbeat Economic Indicators

Citing the latest data related to the High Frequency Indicators (HFIs), the government has said that the economy is showing “strong signs” of recovery, adding that among the 22 HFIs, full recovery has been achieved in 19. The levels of these 19 economic indicators are higher in September, October and November as compared to their pre-pandemic figures in the same months in 2019.

Among the 19 HFIs, there are some indicators whose recovery is way beyond 100 percent, such as e-way bill by volume, merchandise exports, coal production and rail freight traffic, which suggest that not only the recovery is complete, the economic growth is now gathering momentum.

Ladderup Wealth Management Managing Director Raghvendra Nath told Moneycontrol that he expects a broad-based rally in Indian markets over the next few years and that the initial volatility triggered by the Omicron variant fears were pre-emptive.

“There are still a few weeks before the world understands the extent of transmissibility, nature of disease, treatment protocols, and if the vaccinations shall be effective in combating the mutant. I believe whenever the market reacts to such fears in advance, it gradually accepts the emerging developments,” he said.

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