Indian shares’ recent rally was stalled on Tuesday, as gains in energy stocks, amid optimism from declining daily cases of COVID-19, were offset by losses in materials and financials.

The blue-chip NSE Nifty 50 index closed 0.05% lower at 15,574.85, while the benchmark S&P BSE Sensex was unchanged. Both the indexes closed 1% higher on Monday, building up on gains posted last week.

“We feel that the market has had a one-way run up and today it is pausing for breath and we can see a small correction around here because market has been moving up continuously for the last seven to eight trading sessions,” said Samrat Dasgupta, chief executive of Esquire Capital Investment Advisors.

The market is also looking at an optimistic scenario as the economy unlocks, expecting things will return to normal in the next three to four months, he added.

Energy stocks gained after Brent crude prices topped $70 and traded at their highest since March, as optimism grew over the fuel demand outlook.

Reliance Industries Ltd and explorer Oil and Natural Gas Corporation Ltd were among the top boosts to the Nifty 50, rising 0.40% and 3.5%, respectively.

Investor sentiment has improved in recent days due to a steady decline in daily COVID-19 cases. The country on Tuesday reported its lowest daily increase in new infections since April 8 at 127,510, staying below the 200,000-mark for a fifth straight day.

India’s economy contracted 7.3 per cent in 2020-21, official data showed on Monday, its worst recession since independence as coronavirus lockdowns put millions out of work.

Asia’s third-largest economy grew by 1.6 per cent between January and March -- the fourth fiscal quarter -- after exiting its first “technical recession” since 1947 following two successive quarters of contraction.

About 230 million Indians fell into poverty due to the pandemic last year, according to a study by Bangalore’s Azim Premji University, which defined the poor as those living on less than 375 rupees ($5) a day.

An easing of restrictions towards the end of 2020 helped propel a tentative recovery in activity, but this may prove short-lived following an explosion in Covid-19 cases in April and May.

India’s vicious second wave, which has killed 160,000 people in eight weeks, prompted further lockdowns and saw 7.3 million people lose their jobs in April alone, according to the Centre for Monitoring the Indian Economy.

That means more pain in a country where 90 percent of the workforce is in the informal sector with no social safety net, and where millions do not qualify for emergency government rations.

Prime Minister Narendra Modi’s government has so far refrained from announcing any fresh major stimulus measures in response.

The government has faced growing criticism -- including from Nobel prize-winning economists Esther Duflo and Abhijit Banerjee -- for focusing on loans to hard-hit businesses rather than direct cash handouts to vulnerable households.

In a recent report, British financial services firm Barclays pegged the economic cost of India’s second wave at $74 billion, or 2.4 percent of GDP.

But helped by output having slumped so much last year, the headline figures for the current fiscal year will still appear strong.

India’s central bank is projecting annual growth of 10.5 per cent and the International Monetary Fund 12.5 percent, the fastest among major economies.

“We expect 10 percent GDP growth in FY22, with a slight downside bias,” Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank, told AFP.

But she warned that analysts would “have to revisit this expectation much more often, given it depends on the pace of vaccinations and the pace of restrictions”.

“While the situation this year is not as bad as the national lockdown last year, the economy is coming under a lot of stress due to localised restrictions, which we expect to continue into the rest of the year.”

India’s economy was in the throes of a prolonged slowdown even before Covid-19 struck, but the pandemic untraveled years of gains.

An estimated 50 million Indians were expected to climb out of poverty last year.

But instead the poorest 20 percent of households lost their entire income in April and May as business ground to a halt.

The stringent months-long nationwide lockdown put around 100 million people out of work, according to a report by Azim Premji University, with around 15 percent unable to find jobs even by the end of the year.

Namdev Sakpal, 43, lost his job at tour operator Thomas Cook last year and has spent months trying to find work.

“With the local trains not functioning I can’t even go looking for jobs. Everything is closed,” the father-of-three told AFP.

Agencies