Equity Benchmarks Recover Sharply After Initial Slump
Indian stocks went through a roller coaster ride on Tuesday as equity benchmarks slumped in early trade due to Fed Chair Jerome Powell’s hawkish stance and rising crude oil prices. The bulls, however, made their return during the day, which helped the markets to close in green.
The 30-share pack Sensex climbed 696.81 points or 1.22 per cent to close at 57,989.30. Its broader peer NSE Nifty rose 197.90 points or 1.16 per cent to 17,315.50.
Both indices had lost nearly 1 per cent on Monday on rising oil prices, and extended those losses in the first half of Tuesday’s session.
“Indian markets rebounded back in the greener zone after witnessing supportive cues from European indices. Some optimistic reports also stated that Ukraine is ready to discuss a deal for Russian cease-fire which resulted in cooling down of crude from day’s high. We believe Indian markets would be on news headlines from global markets and react either way accordingly,” said Prashanth Tapse, Vice President (Research), Mehta Equities.
On Monday, Powell dropped another pipe bomb in less than a week when he announced that the Fed could execute multiple 50-basis-point rate hikes to tame soaring inflation in the United States.
He also hinted that the Fed could start balance-sheet reductions by May; a point of significance for domestic traders as well, considering that a portion of the liquidity deluge unleashed by the Fed through its pandemic-era balance-sheet expansions found its way into Indian markets.
“Positive trend in other Asian and European indices gave a major boost to local gauges. Despite the recovery, uncertainty in the market is likely to prevail and investors will continue to brace for more sharp gyrations in next few sessions. The rising US bond yield and uptick in crude oil prices can unsettle the markets going ahead and investors need to be really careful about this before taking a major exposure,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
Last week, the Fed had hiked rates for the first time in four years and signalled six more increases in 2022. However, markets strongly resisted last week’s rate hike announcement on the back of strong US macroeconomic indicators, highlighted by Powell while announcing the hike.
On Monday, RBI Governor Shaktikanta Das gave a moderate outlook for inflation. He said, “inflation is expected to moderate going forward despite unimaginably uncertain global prices."
During the day, a slight pullback in crude prices, buying in defensive information technology stocks and a gain of 2.6 per cent in bellwether Reliance helped lift equities.
The Nifty IT index added 1.96 per cent, only its third session of gains in eight, with Tech Mahindra ending as the top percentage gainer on the Nifty 50.
On Monday, daily fuel revision resumed after four months in India which helped state owned Hindustan Petroleum, Indian Oil and Bharat Petroleum to gain 1.4-3.1 per cent.
Among the few sub-indices to end in the red was the Nifty FMCG Index, which fell 0.73 per cent. Consumer giant Hindustan Unilever lost 2.8 per cent and was the top percentage loser on the Nifty 50.
“Technically, the index took the support near the 200 day SMA or 17000 and reversed quickly. It also formed a long bullish candle on daily charts which is broadly positive. For the trend following traders, now the 50-day SMA or 17200 would act as a trend decider level. Above the same, the uptrend wave will continue till 17380-17435, while below 17200 the uptrend would be vulnerable,” said Chouhan.
Shares of Future Group companies dropped between 11.2 and 14.9 per cent as Indian lenders are set to initiate debt recovery proceedings against Future Retail this week.
Globally, Asian and European shares were a little higher, with investors adjusting their expectations for rate hikes following hawkish comments from the U.S. Federal Reserve.
(With inputs from Reuters)
