Stimulus hope helps Sensex post 3rd biggest single-day gain, but experts are not convinced

The Indian equity market on March 25 registered its third-biggest single-day gain a day after the government announced strict measures to curb the spread of COVID-19.

In an address to the public, PM Narendra Modi on March 24 announced a nationwide 21-day lockdown. Earlier on the same day, among a slew of measure, Nirmala Sitharaman also asserted that an economic package is being readied and will be out "sooner rather than later."

Today's rally was largely short covering-driven by the hopes of a fiscal stimulus. Positive global cues after White House and Senate leaders agreed on $2 trillion coronavirus stimulus package also lifted sentiment.

The BSE Sensex rallied 1,861.75 points or 6.98 percent to close at 28,535.78 and the Nifty50 climbed 516.80 points or 6.62 percent to 8,317.85. In fact, this was the first biggest rally in the current market turmoil which wiped out around Rs 60 lakh crore of investors' wealth from mid of February.

Both benchmark indices posted a third biggest single-day gain after May 18, 2009 (2,110.79 points on the Sensex and 651.50 points on the Nifty) and September 20, 2019 (1,921.15 points and 569.40 points).

With two consecutive days of gains, the Sensex recovered 2,896.88 points and Nifty 806.75 points from COVID-19-led lows of 25,638.9 and 7,511.1 seen on March 23.

The broader markets too ended with smart gains of 3.3 percent each on the Nifty Midcap and Smallcap indices, but continued to underperform the benchmark.

On the sector front, all indices ended higher with Nifty Bank gaining the most, rising 8.4 percent, while others namely Auto, FMCG, IT, Metal, Realty, Energy and Infra rose 2-6 percent.

But experts are not convinced as we still don't understand the virus or how to contain it.

"Going forward, we expect volatility would remain high in the near term and any sustainable rally would largely depend upon how effectively we can contain the spread of coronavirus now with a 21-day nationwide lockdown in place," Ajit Mishra, VP - Research at Religare Broking told Moneycontrol.

Vinod Nair, Head of Research at Geojit Financial Services also said a much more stable rally can happen only after any news regarding the virus containment comes in. "Global markets have been trading in the green, driven by expectations of stimulus measures to support the respective economies and not because of any change in ground realities."

Asian markets closed with strong gains. Japan's Nikkei gained the most with 8 percent rally, followed by South Korea's Kospi (up 5.89 percent), Australia's ASX 200 (5.54 percent), Hong Kong's Hang Seng (3.81 percent) and China's Shanghai Composite (2.17 percent) after Dow Jones rallied 11 percent overnight.

Globally, so far the total infected cases by novel coronavirus stood at 4.2 lakh with over 19,000 deaths, while in India, infected cases were 562 with 9 deaths.