Early development of Covid-19 vaccine is a silver lining

Indian equity markets managed to end the week in gains with both Nifty50 and Sensex up 1.3% and 1.2% to close at 11,214 and 38,041 respectively. However, the broader market witnessed a sharp rally with Nifty Midcap100 and Nifty Smallcap100 up 4.1% and 5.0%.

All the sectors ended positively except for IT (0.4%) which saw some profit booking.

Metals were the biggest gainer, up 7.8% followed by Media and Auto, both up ~4%. On the other hand, Banks and Financial Services were up 0.5% each while all the rest of the sectors gained 1-2%. FIIs were net buyers this week, buying equities worth Rs 9,496 crore while DIIs were net sellers to the tune of Rs 2135 crore.

Global cues were positive at the start of the week on the back of strong economic data and increasing hopes of a new stimulus plan. However, it turned weak after US President Donald Trump intensified the tensions with China by banning US transactions with two popular Chinese apps, WeChat and Tiktok.

On the domestic front, the RBI’s MPC kept the repo/reverse repo rates unchanged at 4%/ 3.35% and maintained its policy stance at accommodative.

Further, the central bank also announced measures including a one-time restructuring of the loans to support NBFCs, HFCs, corporate debt market, and announced a relaxation on the loan-to-value (LTV) ratio for gold loans.

With the rising US-China tensions and resurging Covid-19 cases, the uncertainties are increasing while the early positive development on the vaccine front remains a silver lining.

Thus the equity markets are likely to remain volatile, with more stock-specific action as the earnings season progresses.

(The writer is the head of Retail Research at Motilal Oswal Financial Services Ltd)