The Indian equity markets have posted second weekly gains. Sentiments turned positive post the government announcement of partial opening up of economy in a phased manner from April 20 and the second round of stimulus from the RBI. On the global front, markets shrugged off China’s GDP contraction data and looked ahead to the gradual reopening of economies including the US. India VIX further cooled down this week to 43 level. On the currency front, the rupee touched fresh all-time low of 76.87 against the US dollar, before closing the week at 76.39.
Brent oil prices witnessed sharp recovery to $33/barrel as top oil-producing nations agreed to a 9.7 billion barrels per day of production cut. However, the prices did not sustain and corrected to $28/barrel.
For the week, Nifty50 and Sensex were up 1.7%/1.4% respectively to close at 9,267/31,589. The broader market outperformed with Nifty Midcap100/Smallcap100 up 3.9%/7.0%. All the sectors ended in green except IT which was down 0.6%. Metals was the biggest gainer up 6.5% followed by Private Banks (+4.8%), Infra (+4.2%) and Pharma (+4.1%). Rest all the sectors ended up between 1-3.5%.
FIIs sold equities worth Rs 4,200 crores this week while DIIs were marginal net sellers of Rs 340 crores.
RBI announced a second set of measures to support the economy by further easing bad-loan rules, freezing dividend payment by lenders and pushing banks to lend more by cutting the reverse repo rate by 25 basis points, second time in three weeks.
Globally, while Investors cheered the partial opening up of economies and various stimulus packages announced across the world, the concerns of a recession loom large. The IMF has predicted that the world this year would suffer its steepest downturn since the Great Depression of 1930s. It slashed India’s projected GDP growth to 1.9% for 2020 from 5.8% earlier. It also said that India and China would be the only two major economies likely to register growth, with all others contracting.
Going ahead, we believe, the markets would react to the corporate earnings, trend in coronavirus cases and any economic stimulus package announcement from the government. The earnings season has already started and the investors would be focusing on the management commentary with regards to the impact of Covid-19 on their respective businesses.
Technically, immediate resistance for Nifty is placed at 9400 - 9500 zone and a sustainable move above the same may result into continuation of ongoing pull-back move towards 9800-10000 mark. On the downside, support is shifting higher to 9100-8800 levels.
(The writer is Head of Research at Motilal Oswal)