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Economic News 27.5.21

Bearish sign emerges for Indian stocks approaching record, shows data

Bloomberg | 27/05/2021 | 6 hours ago

A technical indicator is flashing a bearish sign just as Indian stocks approach record highs. The benchmark S&P BSE Sensex has entered a so-called death cross, with its 50-day moving average crossing below the 100-day average for the first time since March 2020, when global equities saw the worst impact from the pandemic.

“We don’t expect the negative crossover to result in a sharp market decline like we saw in March last year,” said Ruchit Jain, a technical analyst at Angel Broking Ltd.

“In that instance, the Sensex was in a downtrend due to the lockdown and rising cases, while now the market has already undergone a time correction by trading in a range after touching a record high in February.”

🛑Nifty50 index ends above 15,300 for the first time since February 16

Sundar Sethuraman & Bloomberg | 27/05/2021 | 6 hours ago

The benchmark Nifty50 index closed above 15,300 for the first time since February 16. The index rose for a fourth day on optimism that economic activity will accelerate as pandemic-led restrictions ease and vaccinations rise.

The Nifty added 93 points, or 0.61 per cent, to close at 15,301.45—mere 14 points short of a new lifetime high. The index had logged its lifetime high on a closing basis of 15,314.7 on February 15, just before the onset of the lethal second wave of Covid-19. The Sensex closed at 51,017, with a gain of 380 points, or 0.75 per cent. The index is currently 1,136 points, or 2.23 per cent below its record of 52,154, also touched on February 15.

A reduction in fresh daily virus cases to less than half of the recent peak boosted hopes of a gradual resumption of business activities curtailed by localised lockdowns. India remains among the most preferred for brokerages such as UBS and Morgan Stanley in the emerging market space.

“Indian stocks have showed no reaction to the local Covid-19 situation so far,” UBS Global Wealth Management strategists Adrian Zuercher and Crystal Zhao wrote in a recent note. “This is because the market is already looking to its growth recovery, which has likely been pushed out by a quarter.”

The Nifty has risen about 9 per cent so far this year, compared to a 3 per cent rise in the regional benchmark MSCI Asia Pacific Index.

“The earnings momentum has been quite resilient and the policy momentum quite focused towards improving the infrastructure and attractiveness in the global supply chain,” said Daniel Blake, Asia and Emerging Markets Strategist, Morgan Stanley. The brokerage expects India’s earnings growth to see a huge jump in 2022, which will bring down the price-to-earnings multiples. Several states have indicated a slow rollback of restrictions as caseloads fall, suggesting that the hit to economic activity will be in May, and conditions will improve in June, Nomura analysts Sonal Varma and Aurodeep Nandi wrote in a note Monday.

“We remain positive on India’s business cycle and expect GDP growth of 9.8 per cent in 2021,” they wrote. “Our analysis of international evidence suggests that the hit to economic activity will be significantly less than what the drop in mobility suggests.”

Mohit Ralhan, managing partner and chief investment officer, TIW Private Equity, said market sentiments have turned positive with the decline in the ferocity of the second wave. “The risk of further acceleration of Covid-19 has now reasonably subsided, so the focus is back on economic recovery and structural factors driving the economic growth.”

The recent up move in the market was also supported by foreign fund purchases. In the past five sessions, foreign portfolio investors have bought equities worth Rs 5,352 crore. They purchased shares worth Rs 242 crore on Wednesday.

Still, much will depend on the pace of vaccinations, which has recently slowed due to supply constraints and logistical challenges, according to Barclays’ Rahul Bajoria and Shreya Sodhani. The country has administered around 200 million doses so far, enough to fully vaccinate 3 per cent of the population, data collected by Bloomberg and Johns Hopkins University showed. “The slow vaccination drive may pose medium-term risks to growth, especially if the country experiences the third wave of Covid-19 cases,” the pair wrote on Tuesday.

The market breadth was positive on BSE, with 1,904 stocks advancing against 1,231 stocks which declined. Three hundred and seventy-four stocks hit their 52 weeks high, and 474 were locked in their upper circuit.

Two-thirds of Sensex stocks ended with gains, and Bajaj Finserv was the best performing stock, ending the session with a gain of 4.7 per cent. Realty and IT indices rose the most at 2.85 per cent and 1.85 per cent, respectively.

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