Equity benchmarks opened significantly higher even as Asian shares struggled for direction early on Tuesday, weighed by worries over global growth following weak China data that knocked oil prices and commodity-linked currencies.
The 30-share BSE Sensex index jumped 414.45 points, or 0.7 per cent, to 59,877.23 and the broader NSE Nifty index rose 112.65 points, or 0.64 per cent to 17,810.80.
Indian markets were shut on Monday as the nation celebrated its 75th anniversary of Independence, while the currency and debt markets remained closed on Tuesday on account of ‘Parsi New Year’.
Previously, both the benchmark bourses ended Friday on a high, extending gains for a fourth straight week and marking the longest winning streak since January.
A largely positive trend in global equities and foreign capital inflows have supported domestic equity markets.
After falling on Monday, MSCI’s largest index of Asia-Pacific shares traded outside of Japan increased by 0.2 per cent. Although MSCI’s benchmark index has recovered 5 per cent from the year’s lows, it is still down 15 per cent for the year as a whole.
The disappointing Chinese activity statistics released on Monday, which covered industrial output and retail sales, dampened the mood just as investors were finding solace in a four-week surge in global stocks that sent markets to their best levels in more than three months.
Also, A further indication that the world’s largest economy is slowing due to the Federal Reserve raising interest rates is that both US single-family homebuilders’ confidence and New York state factory activity declined in August to their lowest levels since the beginning of the COVID-19 pandemic.
“In short, the risks of a global recession are suddenly much clearer. Then again, they were ‘always’ clear to some,” Rabobank said in a note. “And does anyone think that a central-bank pivot will make them less likely at this stage?”
On Tuesday, the overall picture on Asian stock exchanges was mixed, with South Korean equities up 0.5 per cent while benchmarks in Tokyo and Taiwan barely changed.
After data revealed that economic activity and credit expansion both sharply slowed in July, China’s central bank surprisingly cut interest rates, sending Chinese markets higher. After falling on Monday, the CSI 300 index tacked on 0.1 per cent gains.
Major indexes on Wall Street rose on Monday, recovering losses from earlier in the session.
In anticipation of a slowing in US inflation that would decrease the rate at which the Fed raises interest rates, shares have increased for four consecutive weeks.
The first and second quarters of the US economy saw a contraction, escalating the ongoing discussion of whether or not the nation is currently experiencing a recession.
In Europe, concerns about growth also dominated the conversation.
A fragile demand outlook hit oil prices as they extended losses from the previous session.
Oil prices crashed further on Tuesday, extending losses from the previous session, after economic data from China, the world’s largest crude importer, spurred fresh concerns about a potential global recession that could hit energy demand.
Brent crude futures fell 90 cents, or 1 per cent, to $94.20 a barrel. WTI crude futures fell 81 cents, or 0.9 per cent, to $88.60 a barrel. Oil futures fell about 3 per cent during the previous session.
“Crude oil witnessed a sharp rebound in last few days but failed to hold on to the gains and set fresh February lows which shows that the bears are still in control. Growth worries and shaky risk sentiment amid tightening debate may keep pressure on prices,” said Ravindra Rao, Head of Commodity Research at Kotak Securities.
On Tuesday, the dollar index, which measures the greenback against six major peers, held steady at 106.53, just below the previous session’s peak of 106.55, the strongest since Monday of last week.
The euro, the most heavily weighted currency in the dollar index, was flat at $1.0158 after earlier slipping to the weakest since August 5 at 1.0154.
The Australian dollar, a commodity-linked currency, fell as low as $0.70005, threatening to drop below the psychological 70 cent mark for the first time since Wednesday. New Zealand’s kiwi slipped to $0.6349, also the lowest since Wednesday.