Markets rise over 1% as macro data signals gradual recovery in economy

However, the continued rise in covid-19 cases and extension of lockdowns in many cities may continue to slow down the economic recovery.

The BSE Sensex ended at 35,414.45, up 498.65 points or 1.43%. The Nifty closed at 10,430.05, up 127.95 points or 1.24%

Stocks in Asia Pacific were mixed. Mainland Chinese stocks led gains among the region’s markets, with the Shanghai composite up 1.38%, while markets in Japan were down and rest of the region closed flat.

“Buoyancy in the US and other Asian markets guided domestic equities. Markets also drew comfort from the higher GST collection numbers in June after dismal numbers in April and May. This triggered a rally and forced investors to cover the shorts. Support from financials also helped the traders to take risk of buying in the muted market,” said Shrikant Chouhan, executive vice president, Equity Technical Research at Kotak Securities.

Gross GST receipts for June were 9% below the ₹1 trillion collected in the same month a year ago, but was sharply higher than what was collected in the previous two months. This is a signal for the markets about a strong rebound in economic activities, after the coronavirus crisis.

The manufacturing PMI declined year-on-year to 47.2 in June but surged from 30.8 recorded in May, signalling faster normalisation in manufacturing activity since the nationwide lockdown was lifted on 1 June. A figure of above 50 indicates expansion, while a sub-50 signals contraction.

However, S Hariharan, Head – Sales Trading, Emkay Global Financial Services said foreign institutional activity has turned meaningfully towards selling over the last few sessions. For the last 5 days, they have sold $2 billion across cash equities, stock futures and index futures. “This has coincided with an increase in geopolitical newsflow, which poses a significant risk to passive flows. Q1 results starting next week would present a true picture of the impact of the pandemic on corporate earnings,” he added.

Meanwhile, Indian rupee was down 0.12% to end the day at 75.60 per dollar.

Foreign institutional investors (FIIs) were net buyers of Indian equities worth $3.91 billion in the three months ending June. Domestic institutional investors (DIIs) have pumped in ₹10941.31 crore in Indian shares in April-June period.

Though equities have seen a rally in the last few months, Indian benchmark indices are still down over 15% from record highs touched in January this year. However, both Sensex and Nifty have recovered over 30% from the lows hit in March this year as investors resorted to selling shares soon after nationwide lockdown was announced.