Equity markets have staged a gradual, strong recovery over April though Covid-19 cases have been on the rise in spite of the nationwide lockdown to check the spread of the virus. As on April 30, the Ministry of Health and Family Welfare reported 24,162 Covid-19 active cases and 1,074 deaths in India; 8,372 have been cured or discharged.

On April 30, the 30-stock S&P BSE Sensex closed over 997 points (+3.05%) higher at 33,717.62, compared to Thursday’s close of 32,720.16. During the day, the Sensex gained over 1,167 points (+3.57%) over its previous close to touch the day’s high of 33,887.25, which the day’s low of 33,354.93 saw a gain of over 634 points (+1.94%) over Thursday’s close.

Similarly, NSE’s Nifty 50 added over 306 points (+3.21%) to Friday’s close at 9,859.9 compared to 9,553.35, its closing value on Thursday. Akin to the Sensex, the Nifty 50 too added over 335 points (+3.51%) to Thursday’s close to touch Friday’s high of 9,889.05, and at the day’s low of 9,731.5 the index had added over 178 points (+1.86%) to its previous day’s close.

On a monthly basis, at ₹64.2 lakh crore, the market capitalisation of the Sensex saw an addition of ₹7.63 lakh crore, or 13.48%, compared to the index’s market capitalisation of ₹56.57 lakh crore as on March 31. Also, compared to the close of 29,468.49 and 8,597.75 on the Sensex and the Nifty 50 each.

The respective indices have added over 4,249 and 1,262 points, to close April at 33,717.62 and 9,859.9 respectively. In percentage terms, this monthly gain on the Sensex and the Nifty 50 stands at 14.42% and 14.68% respectively.

While this 14% rise in the benchmarks in April, compared to March’s 23% loss is a positive sign, they do not depict the end of pain for markets. “Although the gains may make it seem as if the danger posed by this virus has been mitigated, the truth is that we are yet to ascertain the full impact of the damage caused by the virus,” says Vinod Nair, head of research at Geojit Financial Services.

Nair adds that the Covid-19 infections seem to have peaked out in many markets, yet it still continues to play havoc, in the form of lockdowns meant to limit its spread. “The US economy itself saw its sharpest quarterly decline in GDP in the last 11 years,” adds Nair. In his view, in April, markets were driven by hopes about easing of lockdown measures, stimulus packages by central banks and other steps to limit the unprecedented economic damage caused by the virus.

So much so that, the current domestic earnings season has lost its relevance, in terms of numbers, according to Nair. “Investors are looking forward to earnings guidance and commentary regarding the normalization of business and outlook,” Nair adds. “The government also made the right moves, in terms of strict measures to control and then planning to ease measures.”

The other good news for April is that alongside the gradual recovery on the indices is the lesser outflow of foreign portfolio investors (FPIs) when compared to that in March. While they continue to be net sellers of equity during April, at ₹6,883.57 crore ($903.95 million) the outflow is way lesser than March’s outflow of ₹61,972.75 crore ($8.35 billion).

While April posted a recovery, according to Sanjeev Zarbade, vice president, private client group research at Kotak Securities, after the strong rally from the lows of March, the risk of a correction has increased in the near term. “Though probability of the market going deep below the 30,000 level looks remote,” says Zarbade.

While Zarbade wants investors to be mindful of a likely correction, he sees hope for the coming time. “Investment from a medium to long term perspective looks workable as we expect corporate profits to show good growth in FY22,” Zarbade adds.

While the market seems to be looking up, Geojit’s Nair warns that the recent increase in cases and worry of the virus spread gaining strength are a concern. “We will need to wait and see the roadmap drawn by the government for easing of the measures,” says Nair. “Businesses have been impacted and it will take time to recover from the demand shock that Covid-19 has dealt them,” Nair adds.

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