Sensex Rallies Over 1,200 Points To Above 58,000, And Nifty Surges 2%
Equity benchmarks surged on Tuesday, recovering from deep losses in the previous session on improved market sentiment after Britain rolled back its tax cuts plan announced last week, which had sent the pound and world markets into a tailspin.
After a 10 per cent surge in the previous quarter, including their biggest single-day jump in a month on Friday, both Indian benchmark bourses crashed at the start of October on Monday.
But global stock markets rose for a second day, boosting US index futures and European equities on bets that central banks would need to ease off on their monetary tightening with economic data already pointing to a sharp slowdown.
That helped the 30-share BSE Sensex index climb 1,276.66 points to end at 58,065.47 and the broader NSE Nifty-50 index to rise sharply, by 386.95 points to 17,274.30.
The market mood was fragile on Monday as crude prices jumped on a potential cut in production by oil producers, exacerbating fears of even higher inflation and a stronger policy response from central banks around the world would increase the likelihood of a global recession.
While crude prices held steady, sentiment improved for risk assets as investors predict that weaker-than-anticipated US manufacturing data will likely reinforce a dovish stance at the Federal Reserve after three percentage point hikes that have started to have an impact on the economy.
But some analysts warned that optimism may not translate.
“My firm view, however, is that this will not be the case. While, technically, having a dual mandate, the Fed have effectively become a single-issue central bank; that issue being bringing inflation back to the 2 per cent target,” Michael Brown, Chief Strategist at CaxtonFX, told Reuters.
“Unless we see a few months of consecutive improvement in inflation data, it’s tough to envisage any sort of pivot, with another 75 bps hike remaining my base case for next month’s decision. It’s tough to be long risk with that on the radar.”
Market observers noted that a snapback, supported by improved sentiment in the UK market, was not unusual after September, when global bonds experienced one of the biggest sell-offs in decades and any currency other than the dollar appeared to crumble. However, they predicted that it would likely be brief.
“The about-face … will not have a huge impact on the overall UK fiscal situation in our view,” NatWest Markets’ Head of Economics and Markets Strategy John Briggs, told Reuters.
“(But) investors took it as a signal that the UK government could and is at least partially willing to walk back from its intentions that so disrupted markets over the past week.”