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Indian equity benchmarks staged a splendid recovery on Monday’s trade to end the session near intraday highs with frontline gauges ending above their crucial 57,400 (Sensex) and 17,050 (Nifty) levels. Markets made a pessimistic start as sentiment remained weak as several states such as Delhi, Karnataka, and Maharashtra enforce new restrictions in view of rising Covid-19 cases. Traders were concerned with a private report as it has penciled in an 8.2 per cent GDP growth next fiscal, with more downside risks to the projection, warning that the New Year will be riskier than the previous two in terms of growth, inflation and the perils of monetary policy normalisation on consumption demand in particular, along with other external risks. Meanwhile, investments in Indian capital market through participatory notes (P-notes) dropped to Rs 94,826 crore till November-end after hitting 43-month high in the preceding month.

However, markets took U-turn and staged a decent comeback as traders opted to buy beaten down but fundamentally strong stocks. Traders took some support after a member of the Monetary Policy Committee (MPC) of the Reserve Bank, Jayanth R Varma expressed hope that in a few quarters from now, capital investment would begin to pick up even in the old economy, and said the next fiscal year is also expected to witness a decent growth. Traders took note of report that the GST regime will see a host of tax rate and procedural changes coming into effect from January 1, including liability on e-commerce operators to pay tax on services provided through them by way of passenger transport or restaurant services.

Markets extended gains to end near intraday highs amid reports that Indian companies have mopped up more than Rs 9 lakh crore through equity and debt routes in 2021 to meet their renewed thirst for business expansion in a buoyant stock market brimming with liquidity and helped by recovering macroeconomic indicators after pandemic-ravaged first few months. Adding to the optimism, rating agency ICRA has said that the recent improvement in recovery of the non-performing assets (NPAs) and decline in provisioning of loans in the banking sector are expected to improve further in the coming year.

Positive trade in European counters too aided sentiments as traders shrugged off concern that Omicron variant of COVID-19 driving up infections around the world. Asian markets ended mostly in red as traders evaluated spiking coronavirus cases and a weekend pledge of greater economic support from China’s central bank.

Back home, banking stocks remained in focus with a private report that the banking sector is set to witness significant reforms in the coming year with privatisation of public sector banks and strategic disinvestment of IDBI Bank on the agenda of the government for 2022. Fertilizer stocks too remained in focus as the government decided to make changes to the existing nutrient based subsidy (NBS) policy to promote domestic production of phosphatic and potassic (P&K) fertilisers amid a sharp rise in global prices.

Finally, the BSE Sensex gained 295.93 points or 0.52% to 57,420.24 and the CNX Nifty was up by 82.50 points or 0.49% to 17,086.25.       

The BSE Sensex touched high and low of 57,512.01 and 56,543.08, respectively and there were 24 stocks advancing against 6 stocks declining on the index.  

The broader indices ended in green; the BSE Mid cap index gained 0.27%, while Small cap index up by 0.52%.

The top gaining sectoral indices on the BSE were Healthcare up by 1.37%, Consumer Durables up by 0.85%, Bankex up by 0.74%, Realty up by 0.49% and IT was up by 0.48%, while Metal down by 0.36%, FMCG down by 0.03%, Telecom down by 0.02% and Energy down by 0.01% were the few losing indices on BSE.

The top gainers on the Sensex were Tech Mahindra up by 3.57%, Dr. Reddy's Lab up by 1.95%, Power Grid Corporation up by 1.60%, Kotak Mahindra Bank up by 1.56% and Sun Pharma up by 1.16%. On the flip side, Indusind Bank down by 0.55%, Asian Paints down by 0.44%, Maruti Suzuki down by 0.32%, Bharti Airtel down by 0.23% and ITC down by 0.21% were the top losers.

Meanwhile, expressing hope that in a few quarters from now, capital investment would begin to pick up even in the old economy, a member of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), Jayanth R Varma has said ‘I am quite optimistic about the Indian economy and its growth prospects... The next year (2022-23) is also expected to witness decent growth’. He added that inflation is a matter of concern, but as of now it is the persistence of inflation rather than its level that is a matter of concern.

According to Varma, the pre-pandemic level of economic activity has already been surpassed, and the rest of this financial year should also see further recovery. He noted that calendar year 2021 saw dozens of new economy companies receive large funding both in private and public equity markets and these companies would have positive spillover effects into the rest of the economy as well. About the threat from the new Covid variant to the economy, he said the Omicron variant does create uncertainties, but he thinks the world is slowly beginning to live with the Covid-19 virus.

On high inflation, Varma pointed out that a few months ago, CPI inflation had breached the upper tolerance band of 6 per cent, but more recently, CPI has been well within the band. According to him, the worry is that inflation is not coming down to the 4 per cent target, and there is a risk of it stabilising at 5 per cent instead for too long a period. The rise in core inflation as well as WPI inflation suggest that CPI inflation may stay elevated well into 2022-23.

The CNX Nifty traded in a range of 16833.20 and 17112.05 and there was 38 stocks advancing against 12 stocks declining on the index.

The top gainers on Nifty were Tech Mahindra up by 3.55%, Cipla up by 2.42%, Dr. Reddy's Lab up by 2.12%, Kotak Mahindra Bank up by 1.43% and UPL up by 1.31%. On the flip side, Hindalco down by 1.33%, ONGC down by 0.83%, Britannia Industries down by 0.79%, Indusind Bank down by 0.69% and Grasim Industries down by 0.52% were the top losers.

European markets were trading higher, France’s CAC gained 10.60 points or 0.15% to 7,097.18 and Germany’s DAX was up by 34.30 points or 0.22% to 15,790.61.

Asian markets settled mostly lower on Monday in holiday-thinned trading as anxiety around the spread of the Omicron corona-virus variant weighed on investors' sentiments. Airlines across the world cancelled just under 8,000 flights over the three-day Christmas weekend over a shortage of staff due to the spread of the Omicron variant and bad weather condition. Chinese shares declined after China reported its highest daily rise in local Covid-19 cases in 21 months over the weekend, with most new infections reported in the north-western city of Xian as it entered a fifth day of a lockdown. While, official data showed that profits at China's industrial firms grew at a much slower pace in November. However, China's central bank, People's Bank of China, pledged greater support for the real economy, and said it will make monetary policy more forward-looking and targeted. Moreover, South Korean shares dropped due to year-end profit taking. Meanwhile, Hong Kong markets were closed for Christmas holidays.

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