Stocks rebound on positive global cues, but caution prevails

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NEW DELHI: Indian stocks rebounded on Friday as investor sentiment improved after China slashed a key charge per unit by a record amount to spice up its economy. On Friday, the Sensex and therefore the Nifty jumped 2.91% and 2.89%, respectively, after recording their worst decline in a minimum of two months each day before. Finance minister Nirmala Sitharaman’s optimism over a sturdy economic process outlook for India also likely lent some support to investor confidence, analysts said.

In India, market confidence was further boosted by Sitharaman’s suggestion that India’s economic process is probably going to be robust at 8.9% in FY23, said Arafat Saiyed, an analyst at Reliance Securities. Saiyed added that the stock markets are likely to stay highly volatile amid the prolonged Russia-Ukraine conflict and Covid cases in China.

V.K. Vijayakumar, the chief investment strategist at Geojit Financial Services, said he expects the volatility to persist which it should take some weeks for the markets to stabilize. The excessive volatility is attributed to 2 reasons by market watchers. The first is that the markets have discounted severe monetary tightening by the US Federal Reserve, which is probably going to require the Fed funds rate to around 3% in 2023. Secondly, the markets haven’t fully discounted the probability of the US economy slipping into recession in 2023. Until there’s clarity on the second issue, the ‘risk-off, risk-on mode’ is probably going to continue within the near term, Vijaykumar said.

While rising interest rates, liquidity tightening, and favorable bond yields within the US are some reasons for FII selling, analysts also say India is that the only emerging market where FIIs are sitting on good profits, and also the markets provide the liquidity to sell. Thus, FII selling may still keep markets volatile. The continued FII selling is additionally putting pressure on the rupee, as are high crude prices. Brent crude was trading at $113.32 a barrel.

The rupee again hit on the bottom of 77.7975 against the dollar on Friday, and sentiments have taken successful over worries that growth would be derailed globally by inflation, rising interest rates, and provide chain issues thanks to the Chinese lockdown, in keeping with the currency desk of Emkay Global Financial Services.

The Federal Open Market Committee (FOMC) minutes, US GDP rate of growth forecasts, and initial jobless claims will all influence global market sentiment, said Yesha Shah, head of equity research, Samco Securities.

The data on India’s interchange reserves, which were within the headlines for falling to a one-year low, moreover because the INR/USD movement, are keenly monitored, added Shah, who expects the markets, will still remain bumpy and investors should remain on the sidelines until a transparent trend emerges.

US stocks declined as investors weighed the danger to growth from policy tightening against China’s latest efforts to bolster its economy. Treasuries and therefore the dollar gained. The S&P 500 traded off session lows, after dropping to within 30 points of a bear-market threshold, marked by a 20% slide from its closing high in January. At the top of another volatile week, price swings are likely to be exacerbated by the monthly expiration of options tied to equities and exchange-traded funds.

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