Stock indices rose sharply on Thursday, ending a two-session losing streak even as global stocks pared their earlier gains and the euro slipped below par with the dollar ahead of the European Central Bank meeting and Federal Reserve Chairman Jerome Powell’s speech later in the day.
The 30-share BSE Sensex index rose 659.31 points, or 1.12 percent, to close at 59,688.22, and the broader NSE Nifty-50 index rose 174.35 points, or 0.99 percent, to 17,798.75.
Oil prices’ plunge to nearly seven-month lows on demand concerns helped investor confidence in local stocks, and both benchmarks reached nearly three-week highs throughout the trading session.
Falling crude oil prices are helping to increase inflation in the country as it imports more than 80 percent of its needs.
“Even with muted global signals, domestic stocks seem to be doing well with lower oil prices,” Anita Gandhi, director of Ariant Capital Markets, told Reuters, adding that valuations looked attractive due to the recent correction.
The Nifty IT and Banking indices were the biggest gainers in the Nifty sub-index, rising 0.9 percent and 2.5 percent, respectively, while the Metals Index declined 0.9 percent.
The best performers of the Nifty 50 were Shree Cement and Bharat Petroleum Corp., which posted gains of 5.5 percent and about 4 percent, respectively.
The biggest gainers among Sensex stocks are Tech Mahindra, Axis Bank, ICICI Bank, Mahindra & Mahindra, Bharti Airtel, State Bank of India, UltraTech Cement, Bajaj Finserv, IndusInd Bank and Asian Paints.
The defaulters are Tata Steel, NTPC, Titan, Nestle, and Power Grid.
“Local financial markets have seen a wave of optimism in tracking strength across global markets with lower oil prices calming investor fears about rising inflation. Despite excellent valuations, consistent FII flows are helping Indian bourses stay resilient,” Vinod Nair, Head of Research in Geojit Financial Services, for PTI Agency.
Earlier, both benchmark indices started the day sharply higher, tracking the rally in Asian bourses reflecting a rally on Wall Street overnight.
The MSCI Asia Pacific stock index outside Japan is recovering after falling to lows last seen in the wake of the 2020 pandemic.
But investors were wary of a 75 basis point interest rate hike by the European Central Bank later Thursday, causing European stocks to give up some of their early gains and bring the euro below par with the dollar.
The European Central Bank assumes the spotlight, as Bloomberg Economics expects a 75 basis point rate hike to tighten forward load even as the region suffers an energy crisis.
“What we’re seeing in Europe is very worrying, what’s happening there is the worst energy crisis we’ve seen since the 1970s oil embargo,” said Ryan Lemand, a board capital advisor at Bloomberg Television. “Europe is going to have a recession, which is one of the worst recessions it’s going to have, and I don’t think risky assets are pricing this correctly.”
While trying to quickly address price pressures, central banks are moving cautiously so as not to cause an unfavorable economic downturn.
Paul Hollingsworth, chief European economist at BNP Paribas Markets 360, told Reuters that markets are largely expecting a 75 basis point ECB hike following recent signals from some top policy makers.
“The fact that we haven’t reached peak inflation in Europe, however, is important here,” Hollingsworth said.
“If they give 75 basis points, we will probably see more rallies and we may see the euro rise a little bit, but we are looking to fade that out,” he added, due to the upcoming recession and winter energy. crisis.
Markets were also watching for any hints of a change in the Fed’s stance on rising inflation during Chairman Jerome Powell’s speech later in the day.
“Markets will likely adopt a wait-and-see approach in the short term,” Gary Ng, chief economist at Natixis in Hong Kong, told Reuters.
“Whether it’s 50 or 75 basis points is going to be important, but the really more important thing is whether inflation can peak, and what is the path for the Fed’s rate hike going forward?”
Regarding concerns about a possible global recession, oil prices recovered modestly from last night’s drop but stayed below $90 a barrel for the first time since Russia’s invasion of Ukraine in February.