Markets snap three-day losing streak; Sensex climbs 875 points, Nifty 305

Amid global relief rally following assurances from Bank of Japan, Fed officials

Equity benchmark indices snapped their three-day losing streak — shedding nearly Rs 22 trillion in market value—amid a global relief rally after senior US Federal Reserve and Bank of Japan officials reassured markets of initiating measures to fix issues that triggered a widespread selloff.
 

The Sensex ended the session at 79,468, gaining 875 points or 1.1 per cent, while the Nifty 50 ended the session at 24,298, gaining 305 points, or 1.3 per cent. The broader Nifty Midcap 100 and Smallcap 100 rose 2.5 and 2.9 per cent, respectively.

Bank of Japan's (BOJ) deputy governor Shinchi Uchida on Wednesday said the Japanese central bank would refrain from hiking interest rates when the markets are unstable. Uchida's comments were the first by a BOJ official after the central bank raised rates last month.

 

Uchida said Japan's economy is not in a place where the bank may fall behind the curve if it does not hike rates at a certain pace. It was also added that the BOJ will not raise its policy rates when financial markets are unstable.

Meanwhile, Federal Bank of Chicago's chief refuted fears that the US is slipping into a recession and said the Fed would move to correct any deterioration in the US economy.

Mary Daly, president of the San Francisco Fed, said the US central bank would do whatever it takes to meet its twin goals of price stability and employment.

However, both insisted the Fed will act only when it gets adequate information that warrants shifting gears.

Concerns over the US slipping into a recession rose after a Friday jobs report revealed a slowdown in hiring. The reversal of Yen carry trades after Japan's central bank raised interest rates also raised concerns about potential outflows from major equity markets.

The India VIX index dropped by 13.7 per cent to 16.2. In the last two sessions, the gauge for market volatility has come off by over 20 per cent. The BSE's total market capitalisation rose by Rs 9 trillion to Rs 449 trillion.

"Global factors and headwinds are likely to persist, which could continue to impact Indian markets over the next few days. Nifty saw a relief rally but volatility cannot be ruled out. All eyes will be on the RBI policy outcome on Thursday, where the committee is expected to maintain the interest rate. Hence, interest-sensitive sectors and stocks would be in focus," said Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services.

Going forward, investors will track macro data from China and the US and the statement of US Fed official Thomas Barkin for further cues.

"Although volatility has significantly cooled off after the sharp surge, there remains potential for further decline. A decisive close above 24,500 in the Nifty is needed on the index front to ease pressure and trigger a sustained rebound. Given the current conditions, we maintain a cautious outlook and recommend continuing with a hedged approach," said Ajit Mishra, SVP of Research, Religare Broking.

Market breadth remained robust, with 2,961 stocks advancing and 983 declining. Foreign portfolio investors were net sellers to the tune of Rs 3,315 crore, while domestic institutions bought shares worth Rs 3,801 crore.

Realty stocks rose, and the Nifty Realty index rose 1.8 per cent after the government rolled back the changes to the indexation benefits.