Sensex erases 2020 losses with 724-point jump

Equity benchmarks rose to near nine-month highs on Thursday following across-the-board buying, as global markets ratcheted higher despite uncertainty over the US Presidential election results. The Nifty reclaimed the 12,100-mark, closing the session at 12,120.3, up by 211.8 points or 1.78%. The Sensex jumped 724.02 points (1.78%) to close at 41,340.16. The Sensex closed above the 41,000-level for the first time since mid-February. In the process, it has also wiped off all losses for the 2020 calendar year. It had closed at 41,306.02 on January 1, 2020.

The markets till date have risen by 59.2% since the crash in March and are just 1.48% away from the all-time highs seen in January.

Experts, however, believe they will now have a case for correction. UR Bhat, director, Dalton Capital Advisors (India), said, “There is a justifiable case for some correction in the markets from the current levels. The last time the markets were at these levels, the economy was in a much better shape and a turnaround appeared imminent. The Covid-19 infection numbers are a bit less alarming now, though highly volatile and with the opening up of the economy, the risk of a second wave cannot be ruled out. The second lockdown in several European countries is a case in point. The markets don’t seem to have priced that in, but seem to have factored only the best-case scenario, which leaves the room for a possible correction in case there is any unfavourable news flow.”

So far this week, foreign portfolio investors have been buyers, pumping in $345.22 million. Since the start of the year, the Indian markets have seen net inflows from FPIs, which have bought equities worth $6.8 billion till date.

Ambareesh Baliga, an independent market expert, said, “Looking at the current situation and sentiment, there is a case for markets to remain at these levels and possibly make a new high, though valuation-wise this is not justifiable. This is because there exists liquidity and momentum in the markets. The markets may continue to see inflows into equities as long as they hold up to these levels…”

Globally, equities gained amid indications that Democratic Party candidate Joe Biden may clinch the US presidential polls. The Asian markets, too, closed higher. Markets in China, South Korea and Hong Kong gained 1.3% to 3.25%.

According to Jefferies, the US presidential elections could drive up information technology stocks and Reliance Industries. “From an Indian market perspective, the US election-driven trends could imply that Indian IT stocks and RIL (internet play) could gain traction… and cyclical stocks, including banks, might lag.”