Sensex rallies over 1,000 points: What triggered this bounce on D-Street?

NEW DELHI: Stock market bulls marched on Dalal Street with heads held high on the last trading day of fiscal year FY20 as relatively better factory output data from China supported the investor sentiment.

Some support also came from the report that the government has put off implementation of the uniform stamp duty on transfer of capital market instruments to July 1, 2020.

BSE Sensex today closed 3.62 per cent or 1,028.17 points higher at 29,468.49, while NSE Nifty rose 3.82 per cent or 316.65 points to close at 8,597.75.


Here are key factors that are driving markets today:

China factory data upbeat
Chinese factories are almost fully back to work, indicated data released by authorities, which in turn helped sentiments on Dalal Street. China's official manufacturing purchasing managers' index (PMI) bounced to 52 in March, up from a record-low 35.7 in February and topping forecasts of 45.

A number above 50 on the index indicates growing activity, though the figure could overstate the improvement. Hence, the number should be read with a pinch of salt because if a company merely resumed working after a forced stoppage, it would read as an expansion without saying much about the overall level of activity.

India to outperform other economies
Multiple agencies have sharply cut the growth projections for India and the world but hopes remain alive for India. The Economist Intelligence Unit (EIU) in its post-Covid-19-outbreak assessment said that even as the Indian economy is likely to be battered by the Coronavirus pandemic this year, it will be better off than all other G20 countries.

The research house projects a GDP growth rate of 2.1 per cent for India in FY21 and along with Indonesia and China (1 per cent each) are among three countries in the G20 that will see a growth in GDP. Others will see contractions, said EIU.

Lockdown flattening the curve?
India may have flattened the COVID-19 curve with the strict lockdown, the first data crunching exercise by the government has revealed.

The ministry of health and family welfare on Monday said India went from 100 cases to 1,000 cases in 12 days. In comparison, Covid-19 cases in other developed countries rose between 3,500 and 8,000 in the same time frame.

However, it should be noted that the country also has one of the lowest testing rates in the world. The government, meanwhile, said it is in the process of identifying hotspots where a larger number of cases are being reported.

Global funds rebalancing portfolios
Multi-asset-class investors like pension funds, etc. are required to rebalance their portfolios at the end of a quarter, which may have resulted in rallies in the last couple of days.

“With bond portfolios remaining broadly unchanged and a massive plunge in equity part of their portfolios, these funds are required as per their mandates to rebalance, i.e., buy equities and sell bonds. Between $75 to $150 billion of equity buying is expected. Some investors front run this buying by pension funds and hence the rally last week,” said Ajay Bodke, CEO & Chief Portfolio Manager-PMS at Prabhudas Lilladher.

Global markets
Global markets also rallied, helping the morale of domestic investors. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.94 per cent.

Shanghai blue chips rose 0.4 per cent and South Korea 1.87 per cent. Japan's Nikkei eased 1 per cent, to be down 20 per cent since the start of the year.

E-Mini futures for the S&P 500 were flat, EUROSTOXX 50 futures rose 0.7 per cent while FTSE futures fell 0.25 per cent, indicating a mixed start for European shares.

Overnight, healthcare had led Wall Street higher, with the Dow ending up 3.19 per cent, while the S&P 500 gained 3.35 per cent and the Nasdaq 3.62 per cent.