The market index rose to a high in early morning trade, but declined sharply in the afternoon, with increased geo-political tensions with China. New investors who came in after the March low might not be ready to experience pain, say experts
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The benchmark 30-share Sensex index scaled the 40,000 points level—its highest level in over seven months—in early trade on Monday, before retreating on increased geo-political tensions with China. The sustained surge in equities—54 percent from the March 23 low of 25,981 level—has raised concerns of whether the current rally will sustain in coming months, particularly due as economic growth across some sectors continues to be sluggish due to the impact of the Covid-19 pandemic.
In early trade, the Sensex index rose to a high of 40,010.17 before declining sharply in afternoon trade, to close at 38,628.29 points, down 2.13 percent from the previous close.
Despite indices retracing from their highs, over 100 stocks, including Adani Green Energy, AstraZeneca Pharma India, L&T Infotech and Mindtree hit their 52-week highs at the exchanges on Monday. Investors will watch for GDP data due to be announced later in the day, which will reveal the pace of growth for the three months to June. The pandemic is likely to reveal negative growth for the period, after expanding by 3.1 percent in the previous March-ended quarter.
For the past four months, the biggest debate has been the apparent disconnect between India’s stock prices—which have surged due to improved liquidity in the system—compared to the disappointing GDP data. Since the lockdown in March, earnings growth for some corporates has surprised in the positive, particularly in the pharmaceutical, two-wheeler, telecom, metal and cement sectors.