This week turned out quite good for Indian benchmark indices and particularly investors who are invested in the stock market. The market has bounced back more than 40 per cent from recent lows of March month. When everybody fall victim of COVID-19 crisis, the market experts suggested to be cautious in the current market and avoid bulk buying. There is no good news in the market at all. Yet financial markets are going higher as if there is nothing to worry about. On one side, the benchmark index NIFTY50 finally reclaimed the psychological level of 10,000 the BSE-SENSEX also climbed above 34,000 levels.
It may seem surprising to a lot of people but it ain’t surprising at all. Historically it has happened before almost after every major crisis. But, that’s not the only reason. Other factors are also lifting the market momentum which we’re going to discuss below:
It’s been a few days when the domestic indices are reacting to positive global peers. The global market remained strong today as well, despite the George Floyd killing, the US Market remained strong where its major indices Dow Jones, NASDAQ Composite, and S&P 500 were trading on the higher note as the investors started looking beyond lockdown and coronavirus, towards the economic recovery. The gradual reopening of economies after easing lockdown measures boosted the investors’ confidence
Asian peers also recovered quite much in a few days. The European market, too, was strong where its major indices FTSE100, DAX, and CAC40 were closed in green.
Ease in Lockdown
In lockdown 5.0, the government allowed the economic activities in all regions except containment zones. The lockdown 5.0 was not the extension of full lockdown and malls, hotels, restaurants, schools, colleges, institutions, etc., all have been allowed to open in a phased manner over the next couple of months.
However, the private companies and industries still cannot work at full capacity due to social distancing rule but the ease in lockdowns lifted the market sentiment bringing liquidity in the market.
Banking & Financials
The rally in banking & financials significantly contributed to lifting the market sentiment. The recent rally in Bank Nifty indicates the optimism for continuation in operating activities in the banking sector even with less capacity.
The execution of financial packages for MSMEs, SMEs, NBFCs etc. already begun by the banks. Stocks like Bajaj Finserv and Bajaj Finance which hit hard during the lockdown period gained more than 5 per cent in the last couple of days.
The monsoon reached the country on June 01 which is a matter of relief for farmers, investors and especially Indian government as the agriculture contribute more around 17-18 per cent in Indian GDP will be pleased from the timely monsoon in India. At a time when the country is going through an economic crisis, the value of monsoon increases way further. Monsoon is like nectar in agriculture.
The timely monsoon this year boosted investors’ sentiment as production could be strong which would be important to increase the pace of economic recovery in the country.