Indian Equities Start On A Mixed Note, High Volatility Expected

Indian equity benchmarks were mixed on Monday, as investors bet between expectations that Chinese demand will improve, and continuing worries about a global recession from higher for longer interest rates rhetoric.

The BSE Sensex index fell 15.68 to 61,272.11 in early trade, while the NSE Nifty opened in the green, with investors eyeing a volatile trading session.

Both benchmarks had crashed for the second straight session on Friday driven by concerns about a potential global recession in response to hawkish remarks from major central banks.

Dalmia Sugars, Bajaj Hind, Renuka Sugars, and Dwarikesh Sugar were a few of the BSE gainers. Lemon Tree, PNC Infra, Affle, and EPL Ltd. lagged behind in the early trade.

Power Grid, ITC, Nestle, Baja Auto, and Bajaj Finserv were among the most active stocks on the NSE while BPCL, Sun Pharma, ONGC, Infosys, and Tata Motors were trading negatively on Monday morning.

“Domestic equities may see a steady positive opening on Monday despite weakness in other Asian market peers. However, the markets may turn volatile intraday if weakness persists in Asian and European indices, as investors have been risk-averse in the wake of the US Fed Chairman delivering a hawkish stance on interest rates last week,” said Prashanth Tapse, Senior Vice President for Research at Mehta Equities.

“With the US dollar once again beginning to ascend against major currencies, including the rupee, any further depreciation in the local currency could trigger further FII (Foreign Institutional Investors) selling,” he added.

Oil prices stabilised following a dramatic fall in the previous session on the hope that China might ease COVID-19 restrictions, which could limit gains in Indian markets.

For nations like India, which imports most of its crude, a rise in oil prices is detrimental.

Asian stocks recovered on hopes of demand improvement in China after a shaky start to the full final trading session of 2022, driven by the prospect of interest rates rising further next year, dampening holiday optimism.

But data last week accentuated recession worries after business surveys showed activity shrank in Europe, Japan, and the US.

The mood isn’t helped by softening economic data as we approach the end of the year, and markets are left wondering where to search for the upbeat feeling that has boosted US equities in the final two weeks of December 11 times in the past 15 years.

Wall Street shares fell on Friday on weak economic data that added to recession fears. The S&P 500 declined by 2 per cent. It has failed multiple times to trade above its 200-day moving average persistently and is down 20 per cent for the year.

“The Santa rally normally kicks in around mid-December on the back of festive cheer and new year optimism, the investment of any bonuses, low volumes and no capital raisings at this time of year,” Shane Oliver, strategist at AMP Capital, told Reuters.

“It has tended to be weaker or less reliable in years when the market is down year to date, though,” he added.