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Sensex Reclaims 50k Mark Amidst Strong Global Cues, Buying by Domestic Institutional Investors

30 May 20235 mins read by Angel One
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The sensex jumped over 600 points in early trade on Thursday to breach the 50k mark after nearly a month. Sensex had last touched 50k on April 1st, followed by a steady slide triggered by a devastating second wave of coronavirus across India that has seen daily cases cross the 3.8 Lakhs mark. The benchmark index touched a high of 50,375 early on in the day before letting go of some of its gains by noon, while Nifty breached the 15k mark, marking the fourth successive day of gains for the indices. The unexpected sensex rally comes in the face of strong global cues led by hope over the administration of the covid-19 vaccine as well as federal stimulus packages being announced in the US.

Banking, Metal Stocks Lead Rally

Banking and metal stocks have led the sensex rally with Bank Nifty up by 510 points or 1.52% and Nifty metal gaining 2.7%. Tata Steel continued its stellar rise in 2021, crossing the 1000 mark to trade at Rs. 1021 at noon. This marks a 14-year high for the steel major driven by a surge in global metal prices. Other metal stocks such as JSW and Hindalco have followed suit to record major gains. Steel prices have been increasing the world over due to an increase in the price of iron ore as well as increased demand from India, China, and the US as the global economy recovers from the covid-19 pandemic. In the banking space IndusInd Bank and Axis Bank led the early morning before letting up steam. RIL rose to a 3-week high as well, posting gains of 2.4%.

Strong Buying by Domestic Institutional Investors

Domestic Institutional Investors led by the Life Insurance Corporation of India (LIC) have been buying aggressively in the market to pick up the holdings dumped by foreign portfolio investors (FPIs). Till date for the month of April, DIIs have pumped in a total of Rs. 10,611 crores whereas the outflow by FPIs for the same period has been to the tune of Rs. 12,014 crores. Analysts say that but for the active buying by DIIs, the present pullout by FPIs would have been sufficient to trigger yet another stock market crash. DII buying in turn has been based on solid March quarter earnings reported by major Indian companies on the back of a resurgent economy. The May 1 rollout of vaccination for people in the 18-45 age group is also being viewed as a positive sign by DIIs as the majority of the workforce especially in blue-collar jobs that form the backbone of the industrial economy fall in this bracket. At the same time, the FPI pullout has been triggered by the surge in covid-19 cases and resultant deaths in the month of April.

Stimulus Package the US Raises Market Hopes

As American president Joe Biden announced plans for a USD 1.8 Billion stimulus package, Asian markets including the sensex gave a loud cheer rallying in response to hopes of an improved global economic scenario. Biden announced greater spending on education, healthcare, and infrastructure in a plan to boost the American economy reeling from the impact of covid-19. At the same time chairman of the Federal Reserve Bank Jerome Powell stated that it was still too early to roll back emergency support for the American economy, further boosting expectations of strong economic demand.

Vaccine Rollout Continues to Raise Hope

Vaccine rollout in India and various parts of the world has also raised hopes of the market of an early recovery from the damaging impact of covid-19. India began its vaccine rollout in January, the world’s largest vaccination program, focusing on senior citizens as well as frontline and health workers. Starting on May 1st, India is set to administer the vaccine to all citizens above 18 years of age. As similar vaccine rollouts are being conducted in the US, UK, Canada, and other major economies, hopes are being raised of an early recovery from the coronavirus pandemic even as a devastating second wave continues to rage across India.

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