Equity benchmarks rose Tuesday, recovering from deep losses in the previous session on improved market sentiment after Britain reversed its tax cut plan announced last week, sending the pound and world markets into a tailspin.
After a 10 percent gain in the previous quarter, including their biggest one-day jump in a month on Friday, both Indian benchmark exchanges crashed on Monday in early October.
But global stock markets rose for a second day, boosting US index futures and European equities on bets that central banks should ease their monetary tightening as economic data already point to a sharp slowdown.
That helped the 30-stock BSE Sensex index climb 1,276.66 points to end at 58,065.47 and the broader NSE Nifty-50 index climb sharply, up 386.95 points to 17,274.30.
IndusInd Bank, Bajaj Finance, Tata Consultancy Services, Bajaj Finserv, HDFC, Tata Steel, Larsen & Toubro, Wipro, HDFC Bank and Axis Bank were the biggest winners of the Sensex group with 30 shares.
Only Power Grid, Sun Pharma and Dr. Reddy’s stayed behind.
“Against the backdrop of strong global signals, benchmark indices are bouncing back strongly,” said Shrikant Chouhan, head of Equity Research for Retail at Kotak Securities.
“All the major sector indices were trading in the green, but the Metal and Private Bank indices outperformed, with both indices rising more than 3 percent,” he added.
Market mood was tense Monday as crude oil prices rose on a possible production cut by oil producers, exacerbating fears of even higher inflation and a stronger policy response from central banks around the world could increase the likelihood of a global recession .
While crude oil prices remained stable, sentiment for risky assets improved as investors predict that weaker-than-expected manufacturing data in the US will bolster a moderate stance at the Federal Reserve after three percentage point increases that begin to impact the economy. economy.
But some analysts warned that optimism may not translate.
“However, I firmly believe that will not be the case. While the Fed technically has a dual mandate, it has effectively become a single-issue central bank,” Michael Brown, Chief Strategist at CaxtonFX, told Reuters .
“Unless we see a few months of consecutive improvement in inflation data, it’s hard to see a pivot, with another 75 bps increase remaining my base case for next month’s decision. It’s hard to risk there long. to walk along.”
Market observers noted that a snapback, supported by improved sentiment in the UK market, was not uncommon after September, when global bonds experienced one of the biggest sell-offs in decades and every currency other than the dollar appeared to be crumbling. However, they predicted it would likely be short.
“The turnaround … in our view will not have a huge impact on the overall fiscal situation in the UK,” John Briggs, NatWest Markets’ head of economics and market strategy, told Reuters.
“(But) investors saw it as a signal that the UK government could and is at least partially willing to reverse its intentions that so disrupted markets over the past week.”