Indian stock markets rallied on Monday as investors cheered government’s announcement to relax lockdown in phased manner across the country after almost two months of strict measures. The government is on a step-by-step approach to restore normalcy while businesses focus on exit strategies and revive growth.
The BSE Sensex ended at 33,303.52, up 879.42 points or 2.71%. The Nifty was at 9,826.15, up 245.85 points or 2.57%.
Gains in global peers also lent support to Indian markets. Shares in Asia Pacific were higher on Monday, with Hong Kong’s Hang Seng index surging more than 3%. US President Donald Trump announced on Friday that he would be taking action to eliminate special treatment for Hong Kong, following China’s approval of a controversial national security bill for the city. Markets in China, Korea and Australia gained more than 1%.
Indian equities continued the rally on the fourth straight day on after government relaxed some lockdown norms to revive the economy, said Deepak Jasani, Head Retail Research, HDFC Securities Ltd. “Asian shares advance as progress on re-opening economies helped offset jitters over riots in US cities and unease over Washington’s power struggle with Beijing. India is likely to receive 102% rainfall of a long-term average this year, the IMD said on Monday in its 2nd long range forecast, raising expectations for higher farm output in India, which is reeling from the new coronavirus pandemic,” he said.
According to analysts while lockdown relaxations would help improve supply-side situation and potentially defray fixed costs, it would also drive consumption at the margin. Retail, jewellery, liquor, real estate and hotels and restaurants sectors are expected to benefit most in the first phase of lockdown relaxation.
Retail oriented stocks led gains with BSE Consumer Durables rising over 6% while auto and bank stocks also surged.
Analysts at CLSA think three cash, cost and consumer would be the most critical for discretionary consumption companies to navigate the current crisis and create a more resilient business model.
“The retailing space is progressively restarting in a phased manner, but it could be the end of this year before operations normalise for many. Consumer discretionary companies are adopting several innovative measures for restarting operations and wooing the consumer back to the stores. Some of these measures are also likely to permanently alter the business models of companies, in our view,” said CLSA.
However, despite a nationwide lockdown, covid-19 has spread widely, with over 80% of the country’s districts reporting infections. The higher number of infections in key industrialized states and urban consumption centers poses a headwind to economic growth, said Nomura.
“The financial package announced thus far is aimed at survival and prevention of major dislocation. In absence of a meaningful growth stimulus and visibility of private sector participation over the medium term, investors are likely to remain concerned on macro parameters and medium-term growth prospects,” Nomura.