How did the Sensex spike despite the second wave?

The increased intensity with which the pandemic is striking India has left many startled. Not only have the number of infected individuals been rising, but the resources to support them have been depleting as well. In addition to the rise in the number of cases, the morbidity rate has also gone up. With this trend, it is quite common to expect the economy to take a hit as well. However, to the surprise of many, the stock market has seen an increase in valuation ever since.

With India having reported the highest one-day spike of 3,52,991 new cases across the country with 2,812 deaths over the past 24 hours, Sensex has shot up with 750 points. It is surprising and wishful that Mumbai, popularly referred to as the country’s financial capital, recorded its lowest one-day rise in Covid-19 cases on Sunday (25 April 2021). Another positive aspect is that the recovery rate has increased with 8,478 people recovered from the infection.

An overview about Sensex 

On Monday, the Indian stock market surged by 1%. Many believe that this surge is primarily backed by two parameters: the increase in vaccination and the decrease in the number of Covid-19 cases in Maharashtra. At 9:30 am, Sensex rose by 1.1% to INR 48,422.57 whereas Nifty was up by 1.3% at INR 14,523.

The Vice President of Research at Religare Broking mentioned that the markets continue to remain under due pressure as the number of Covid-19 cases continued to increase last week. Accompanying the increase in cases, strict rules and restrictions had been imposed throughout. He also claimed that, however, at the end of the week, updates on the increased number of vaccination doses and the exceptional performance of the stock market capped this damage.

Overall, the surge in Sensex points and the good performance of Nifty has restored faith in many pertaining to the economic performance of the country.

The potential reasons for the surge in Sensex

One of the main factors for the exponential gains in Sensex is the performance of the banking sector, auto sector, and consumer durables stocks. The top gainers in Sensex were Axis Bank, ICICI Bank, and UltraTech Cement that increased its price up to 5%. BSE bankex was at 929 points higher trading at INR 36,952. In addition, Nifty experienced a rise of 732 points reaching INR 32,459 in today’s trade.

Another main reason for the surge in Sensex and Nifty prices is the increasing number of vaccine doses that are administered to the public. Vaccination plays a major role in both volatility and the performance of the stock market.

In lieu of this, Siddhartha Khemka, the Head of Retail Research at Motilal Oswal said that the volatility of the Indian stock market will continue as long as the number of Covid-19 cases continues to increase. This would come along with investors continuously keeping an eye out for the vaccination drive that would progress the nation towards flattening the curve. Once the number of vaccination doses that are administered increases, the number of new cases will decrease. This supports the notion that vaccinations can change the story of the stock market in terms of volatility, price, and trend.

Finally, Asian markets also reflected on the positive trend with Shanghai, Hong Kong, Seoul, and Tokyo trading positively with an upward trend. Nikkei 225 of Tokyo increased by 0.3% by rising to 29,120,12. Hang Seng in Hong Kong rose less than 0.1% to 29,093.33 with the Kospi in Seoul rising by 0.8% to 3,480.68.

Besides, according to provisional exchange data, FIIs (Foreign Institutional Investors) offloaded shares that were worth Rs. 1,360.76 Crores on Friday. They contributed to a large number of net sellers in the market.

Conclusion

With such a strong uptrend from Sensex and Nifty, the economic stance especially with regards to the stock market seems to be positive. Many investors believe that despite the increasing number of Covid-19 cases in the second wave, large economic damage similar to that of last year is unlikely to happen. This is also backed up by the increased vaccination doses that are being offered to the public that further reduces the incidence of cases thereby reducing market volatility.