Rally in RIL drives markets over 2% higher; rupee hits new low yet again

Led by gains in shares of index heavyweight Reliance Industries Limited (RIL), Indian stock markets ended higher on Wednesday despite the relentless rise in the number of covid-19 cases in the country and global recession fears looming large.

The BSE Sensex ended at 31,379.55, up 742.84 points or 2.4% while the 50-share index Nifty closed the day at 9,187.30, up 205.85 points or 2.3%.

Equity markets in Japan, China and Korea had a mixed day.

According to analysts, the 10% jump in the RIL stock contributed to around 50% of the gains on benchmark indices. The up-move, however, may not be sustain for long as worries about losses in businesses due to disruption caused by nationwide lockdown will persist.

“Today’s surge was largely in response to the Reliance-Facebook deal and we may again see the selling pressure emerging at the higher levels. Needless to say, the covid-19 updates combined with signals from the earnings front would dictate the market trend from hereon. Besides, the movement of crude oil and the currency market will also be in focus," said Ajit Mishra, VP - Research, Religare Broking Ltd.

Volatility in the markets also cooled off significantly on Wednesday. The Indian volatility index or VIX ended at 42.82, down 5.25%.

Shrikant Chouhan,executive vice president, equity technical research at Kotak Securities said, “Today, indices erased almost 60% of the previous session's losses, boosted by media reports that the Cabinet Committee on Economic Affairs (CCEA) is expected to take a call on a fresh stimulus package for India Inc. soon. Technically, the market has entered the short-covering mode as the Nifty crossed the highest level (9050) of the previous day and touched a high of 9200, which was highly unexpected for the day."

Indian rupee, meanwhile, again made new lows today. The domestic currency closed at 76.67 against the dollar compared with the previous close of 76.83. In opening deals, however, the unit had touched a record low of 76.92.

The 10-year bond yield ended at 6.223% from previous close of 6.208%.

According to Rahul Gupta, head of research- currency, Emkay Global Financial Services, the Indian rupee recovered during the day due to Facebook and Reliance deal.

“Facebook plans to invest nearly $5.7 billion, the money will hit forex market in tranches either end of this month or sometime next month. However, global market is still risk averse, it is virtually impossible for traders to imagine how the world will come out of the coronavirus pandemic," he said.

The Indian rupee has depreciated 6.89% in this year so far. Having declined 1.46% in April, the rupee is one of the weakest Asian currencies.

Source - LIVE MINT

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