Mumbai: Indian benchmark indices ended lower on Monday as rapid increase of Covid-19 cases around the world and especially in the US, threatened to derail the economic recovery hopes. With states in India set to extend lockdown or reconsidering bringing back lockdown measures, markets seem to be weighing the bad news. Maharashtra government, on Monday, extended lockdown in the state till 31 July. The state government asked officials to enforce measures and necessary restrictions during the extended lockdown to contain the spread of the virus. The BSE Sensex ended at 34,961.52, down 209.75 points or 0.60%. The Nifty closed at 10,312.40, down 70.60 points or 0.68%.
Markets in other parts of Asia Pacific region were also weak with Japan’s Nikkei down 2.3%. Investors are cautious that surge in cases worldwide could impact the reopening of economies.
Nagaraj Shetti, Technical Research Analyst, HDFC Securities said, “After showing late upside recovery on Friday, Nifty slipped into weakness in the early market trade of Monday on the backdrop of weak US and Asian markets and later shifted into a narrow range movement for the better part of the session. Nifty showed upside recovery towards the end.”
According to analysts at Morgan Stanley, global economy will be able to sustain its recovery and avoid a double dip. “We received a stark reminder this week that the fight against covid-19 is not over, as new cases globally thrice reached new highs. Unsurprisingly, the number one question we get from investors is whether this resurgence disrupts our call for a V-shaped recovery. The answer is no. We remain confident that the global economy will regain its pre-covid-19 levels in four quarters and developed economies in eight quarters,” said Morgan Stanley.
However, despite continuous concerns of steep valuations and weak fundamental support, foreign fund flows into India significantly improved in June. According to analysts an unprecedented amount of fiscal and monetary stimulus and gradual reopening of economies post lockdown kept sentiment intact worldwide and India has been largely beneficiary of that.
Foreign institutional investors (FIIs) inflows into Indian equities were at $2.87 billion in June so far, highest ever in the year. FIIs have been gradually allocating money into Indian shares with an inflow of $1.71 billion in May after a massive sell-off of $8.42 in March and April. The foreign money also drove Indian markets over 8% higher in June outperforming both MSCI Emerging Markets (EM) and MSCI World index in the month.
Domestic liquidity in Indian shares is tapering off. Domestic institutional investors (DIIs) have sold shares worth ₹626 crore in June after an inflow of ₹11,355.93 crore in May. In this year so far, they have infused money worth ₹85,821.68 crore in equities. Hence, reason for DIIs offloading money in June is mostly attributed to profit booking.
On Monday, Indian rupee was up 0.08% to end the day at 75.58 per dollar.