Dow Jones sets historic day of gain, favorable cues for Sensex and Indian equity markets

Source : Sify
Author : Finance Desk
Last Updated: Tue, Mar 3rd, 2020, 09:29:25hrs
Dow Jones sets historic day of gain, favorable cues for Sensex and Indian equity markets

Equity markets in United States and rest of the world reportedly made a come-back. A mild relief of sorts for traders coming from a week of intense speculation and stinging from Covid-19 inflicted losses.  

On Monday, the Dow saw a historic surge. The Dow Jones Industrial Average soared 1293.96 points, or 5.09 per cent, to 26,703.32. This was the best one-day point gain in the 30-scrip index's history and best percentage point gain since March 23, 2009.  

Apple shares jumped 9.3 per cent, leading the gainers in the Dow. All of the 11 primary S&P 500 sectors gained, with utilities and technology up 5.86 percent and 5.7 per cent, respectively, outpacing the rest.

Rallies have been observed on several indices.  

The S&P 500 rallied 136.01 points, or 4.6 per cent, to 3,090.23. The Nasdaq Composite Index increased 384.8 points, or 4.49 per cent, to 8,952.17.

Japan's Nikkei 225 gained 0.5% in morning trading to 21,441.82. Australia's S&P/ASX 200 jumped 1.9% to 6,510.90. South Korea's Kospi rose 1.8% to 2,038.38. Hong Kong's Hang Seng edged up 0.4% to 26,403.19, while the Shanghai Composite was up nearly 1.1% at 3,002.56.

The moderately upbeat movement tracks a week of marauding that saw a correction of at least 10% off several indices.

The optimism on Monday stems from a series of coordinated efforts by governments and other agencies in tackling Covid-19. There is also a hope that central banks could turn accomodative in lowering interest rates to shield the global economy from the current outbreak.  

APNews quoted Vishnu Varathan of Mizuho Bank in Singapore as saying, "One reason may be that more nuanced measures to ease cash-flow will offer reprieve for businesses and households affected by seizures in activity and disruptions in supply-chains."

The report also quoted Sam Stovall, chief investment strategist at CFRA as explaining, "Investors have convinced themselves that global central banks will likely be even more accommodative in order to short-circuit any psychological damage."

Some hints of a course-correction could be the Benchmark U.S. crude rose $1.99, or 4.4%, to $46.75 a barrel on Monday. This, even as the Dollar rose to 108.07 JPY from 107.74 JPY. Brent, the international standard gained $1.36 to $53.26.

Will Sensex and broader Indian indices too follow suit?

The Sensex in the previous week has seen negativity. There has been a loss of at least Rs 12.90 lakh crores of investor wealth. The BSE market capitalisation has constantly ebbed since Feb 19 from Rs 1,58,71,065.31 to Rs 1,45,80,863.90. The difference in this market capitalisation of listed shares on the Bombay Stock Exchange reflects a loss of Rs 12.90 lakh crores (12,90,201.41).

Siddhartha Khemka, Head Research at Motilal Oswal Financial Services explains in a note that the seven straight sessions of a rout makes it the longest losing streak in CY20 [Calendar Year]. Monday, there was a likelihood of Indian equity markets taking favorable cues from global markets, however, "There was all round sell off in the market after two new cases of coronavirus getting confirmed in India. Even the broader market fell in tandem with the benchmark, with both Nifty Midcap 100 and Nifty Smallcap 100 down 0.7% and 1.2% respectively. All the sectors ended in red, except IT which was up 1.4%. Media and PSU Banks were the biggest losers and fell ~4.5% while Metals fell more than 2%. The Volatility Index (VIX) surged 8%."

Will global cues entice Indian equity markets on Tuesday and the remainder of the week? Will a statement on preparedness act as a morale-booster for loss-struck markets? Is there a recovery? Even as one speaks, the opening session on the Sensex saw a massive gain of 504.68 points to 38,648.70.

Speaking of Nifty, Shrikant Chouhan of Kotak Securities explains the support levels for Nifty50, the 50 scrip broader exchange on the National Stock Exchange. "Technically, Nifty has major support between 11100 and 11000 levels. Below the level of 11000, the index would fall to 10900 or 10800 levels. On the higher side, 11385 and 11450 would be major hurdles," he says.  

With inputs from agencies