Stock Market India: Sensex gains over 150 points, after 1,200 points rally on Tuesday
Indian equity benchmarks pared some gains on Thursday but extended their rise for the second straight session adding to the rally of over 2 per cent on Tuesday, driven by renewed foreign capital inflows on improved risk sentiment as reflected in global stocks trading modestly higher.
That even as the debate on a surge in oil stoking inflation raged widely.
The BSE Sensex index rose 156.63 points to close at 58,222.10, and the broader NSE Nifty index advanced 57.50 points to settle at 17,331.80, adding to the over 2 per cent rally for both benchmarks on Tuesday.
On Wednesday, Indian markets were closed on account of Dussehra.
“Weakness in European indices and SGX Nifty slipping into the red prompted investors to cut their bullish bets. But key domestic benchmarks still ended in the green thanks to traders betting big on IT, metals & realty stocks,” said Shrikant Chouhan, Head of Equity Research (Retail) at Kotak Securities.
“However, inflationary concerns worldwide and central banks hiking interest rates persistently has spooked markets and kept investors on tenterhooks on worries of a global slowdown,” he added.
Financial markets are currently being heavily influenced by shifting expectations over how quickly central banks, particularly the Federal Reserve, would raise interest rates.
A crucial question is whether the Fed will change course from focusing largely on inflation and hiking rates quickly or take slower economic growth into account and raise rates more cautiously.
As a result, Friday’s US jobs report and next week’s inflation data will be extensively scrutinised.
“Investors will be looking (in Friday’s payrolls report) for signs of anything that might cause the Fed to do an early pivot; everything they say suggests they have no intention of doing so, but I suspect there are people out putting these pivot trades on,” Stephen Gallo, European Head of FX Strategy at BMO Capital Markets, told Reuters.
That shift in the market’s thought process was driven by this week’s unexpectedly mild 25 basis point increase in Australia.
Indeed, that gave rise to optimism that other central banks might soon scale back their tightening.
But just as investors seemed to be finding relief from the relentless march up in energy costs, especially in Europe, where customers are seeing their power bills double from the previous year, the price of crude oil increased for a fourth day.
Since the COVID-19 epidemic started, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have agreed to the steepest production cut, squeezing out supplies in an already constrained market.
That pushed oil prices to rise to their highest level since mid-September.
“Rising commodity prices have been and will be demand destructive,” James Athey, Investment Director at abrdn, told Bloomberg. “There are a lot of fragilities in this system.”
On Wednesday, US markets had ended a two-day winning streak, as investors were wary of placing large-scale equity bets, although the S&P 500 closed just slightly lower thanks to a surge in energy stocks.
If rising inflation and slower growth have an impact on corporate profitability right before the quarter-end reporting season, equity sentiment may be negatively impacted.
“Inflation fears may get assuaged but then they turn into growth fears and that turns into a problem for corporate earnings,” said Emily Roland, Co-Chief Investment Strategist for John Hancock Investment Management, in an interview with Bloomberg TV.
