Nifty Recovered on Positive Global Cues, ICICI/RBI Boost, and Global COVID Helps

  • Market Overview

Nifty Recovered on Positive Global Cues, ICICI/RBI Boost, and a Deluge of Global COVID Helps for India to Fight the COVID Tsunami

India’s benchmark stock index Nifty 50 (NSEI) closed around 14485.00 Monday; surged almost +1.00% on positive global cues, ICICI/RBI boost, and a deluge of global helps for India to fight COVID tsunami. On Monday, India’s Nifty opened around a +50 points gap up following upbeat Wall Street Friday overnight. On Friday, Dow Future recovered almost +400 points from the session low (Indian market hours) on the perception that Biden may ultimately go for around 28% capital gain tax (from the present 20%) instead leaked report of 39.6%. There was also a report of Biden’s next fiscal stimulus plan of around $1T intended for various social safety nets. Dow was also boosted by upbeat U.S. PMI data.

On Monday, India’s Dalal Street was also boosted by an upbeat report card from ICICI Bank (NS: ICBK ), which in turn also boosted other private banks. The risk-on sentiment was also supported amid a deluge of help by various countries and organizations. The U.S. also agreed to supply some critical raw materials for India’s COVIDSHIELD (Oxford-Astra) vaccine and taking the initiative to enhance India’s vaccine production through a private company (Biological-E).

Various countries including U.S., U.K. Germany, Saudi Arabia, and Singapore are dispatching concentrated O2 and O2 mobile plants in India to fight the current O2 crisis and save lives. U.S. may also supply readymade Astra-Zeneca COVID vaccines, which it no longer requires amid the rare blood clotting side effects. There are some declining COVID trends in Mumbai/MH and UP. Earlier Biden said: Just as India sent assistance to the United States as our hospitals were strained early in the pandemic, we are determined to help India in its time of need.

There was also a report that going by various statistical calculations, India’s daily COVID cases may peak around 400K by early May and then should decline gradually from June onwards. In any way, apart from specific medical reasons, the Indian oxygen crisis for COVID may be one of the adverse effects of acute pollution due to excessive usage of transportation/fossil fuel, especially in big cities. Also, as per some serological surveys done by ICMR, antibody production in the 2nd COVID wave (by new mutant strain) is only around 10% (?). If this is true, it’s a matter of serious concern.
On early Monday, Nifty made a session high 14557.50 amid all these positive cues, but slips after European market opening as Wall Street futures came under some pressure on rising U.S. bond yields after a survey that Fed may go for QE tapering in Q4-2021 as the U.S. economy is recovering faster than expected.

And Nifty also stumbled after India’s Karnataka state (Bangalore) announced full lockdown for 2-weeks. Later in the evening, Punjab imposed ‘daily lockdown’ from 6 pm to 5 am until further notice; weekend lockdown from Friday 6 pm to Monday 5 am. In the evening, Indian PM Modi called U.S. President Biden.  

Modi tweeted: Had a fruitful conversation with @POTUS @JoeBiden today. We discussed the evolving COVID situation in both countries in detail. I thanked President Biden for the support being provided by the United States to India. My discussion with @POTUS @JoeBiden also underscored the importance of smooth and efficient supply chains of vaccine raw materials and medicines. India-US healthcare partnership can address the global challenge of COVID-19.

Meanwhile, on Monday, in its April report, RBI warned if the 2nd wave of COVID in India, if left uncontrolled, could lead to prolonged restrictions on movement and supply chain disruptions with consequent inflationary pressures. But RBI is also ready for a strong policy response.

State of the Economy

As India battles the ferocious rise of new infections, a strong policy response is building. Economic activity in India is holding up against COVID -19’s renewed onslaught. Apart from contact-intensive sectors, activity indicators largely remained resilient in March and grew beyond pre-pandemic levels. The resurgence in COVID-19, if not contained in time, risks protracted restrictions and disruptions in supply chains with consequent inflationary pressures. Pandemic protocols, speedier vaccination, ramping up the hospital and ancillary capacity, and remaining resolutely focused on a post-pandemic future of strong and sustainable growth with macroeconomic and financial stability is the way forward.

Growing infections and consequent restrictions, though still local and regional in nature, have imparted high uncertainty to the outlook. Going forward, the calculation of year-on-year CPI inflation prints for April and May 2021 is subject to uncertainty given that April and May CPIs a year ago were not based on actual price data collections but were imputed--- ---over the last month, there were two positive developments on the prices front. Firstly, there is an increasing likelihood of a normal south-west monsoon in 2021, and secondly, the retreat of crude oil prices from a peak level of around $70 per barrel could result in some softening in domestic pump prices. Coordinated policy actions by the centre and states to rationalize high taxes on petrol and diesel can help bring relief to households by lowering pump prices and mitigating second-round effects on the economy---upside risk to inflation emanating from input price pressures in manufacturing and services, as evidenced from the purchasing manager's index (PMIs), remain.

RBI also indicated more QE-Lite (GSAP 2.0) and termed it as Brahmastra (nuke):

RBI stepped off into hitherto uncharted terrain. Named G-SAP or government security acquisition program to bring about an ebbing of bond market tempests, especially the unwinding of trade positions caught offside and out of line with fundamentals. It involved a testing judgment call; now, the die is cast. And it is named G-SAP 1.0 with a purpose – it’s just a beginning.

Overall, RBI is now giving more priority to GDP growth rather than price stability despite both core as-well-as headline inflation are consistently elevated at around +6%, far higher than the target of +4%. As there is no space for further rate cuts, the primary tool for RBI is now QE-Lite; liquidity injection.

On Monday, apart from the ICICI Bank report card boost, banks & financials were also jumped on hopes of RBI QE-Lite 2.0 for Rs.1T. The Indian market was also boosted by reality, metals, infra, energy, MNCs, automobiles, FMCG, techs, and media, while dragged by pharma. Nifty was helped by ICICI Bank, RIL (M&A and deleveraging move coupled with the start of gas production in KG D6 block with BP (LON: BP ) JV), Axis Bank (NS: AXBK ), HUL, Kotak Bank, Infy, SBI (NS: SBI ), Ultratech Cement (NS: ULTC ) and JSW Steel (NS: JSTL ). Nifty was dragged by HDFC Bank (NS: HDBK ), HCL Tech (NS: HCLT ), Cipla (NS: CIPL ), Britannia (NS: BRIT ), TCS (NS: TCS ) and Maruti (NS: MRTI ).

Technical View: Nifty and Bank Nifty Future (Updated)
Technically whatever may be the narrative, Nifty Future now has to sustain over 14750-14850 and Bank Nifty Future 32800-33800 levels for a further rally; otherwise except some corrections as per below levels.

INDIA50 ( Nifty 50 Futures )

Bank NIFTY Futures

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  • Yash Agrawal @Yash Agrawal
    Like 0
  • S S Shetkar @S S Shetkar
    this guy sundar lara has only one reason for everything ... covid..
    Like 2
  • Sunil kumar @Sunil kumar
    Its just short covering ... Wait for 02 day... Tomarrow onwards DII will start selling
    Like 0

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