Gains for the Sensex and Nifty, breaking a two-day losing streak on oil below $100

Indian benchmark stock indices rose in the morning on Wednesday, ending a two-session losing skid that had been accompanied by the drop in oil prices to below $100 a barrel. This move drew in investors looking for returns before a widely anticipated US inflation report later in the day.

The wide NSE Nifty rose 60 points to over 16,120 while the 30-share BSE Sensex increased by nearly 200 points to trade at around 54,000.

Hindustan Unilever, Asian Paints, Bajaj Finserv, Power Grid, Larsen & Toubro, and Bajaj Finance were the top gainers among the Sensex constituents.

The losers were HDFC Bank, Reliance Industries, and HCL Technologies.

The MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.65% after plunging to its lowest level in two years the previous session, helping Asian equities bounce back after two consecutive days of losses.

On mounting concerns of a global economic slowdown, oil prices plummeted below $100 per barrel.

“The major positive development from India’s economic and market perspective is the crash in Brent crude to below $100. The bulls are likely to latch on to this good news. But FIIs again turning sellers will be a dampener,” V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told PTI.

India is the third-largest oil importer in the world, and the decline in crude prices benefits the nation by reducing import inflation.

A decrease in oil prices gave the nation, which saw persistent inflation in June, some comfort, which helped to increase consumer equities.

Retail inflation did continue to uncomfortably exceed the 7% threshold and remain above the central bank’s tolerance limit for the sixth consecutive month, which increases the likelihood that the central bank will increase interest rates again next month.

According to a Reuters article, the public sector bank index increased 1.1% while the Nifty fast moving consumer index increased by 0.8%.

According to Geojit Financial Services Vijayakumar, market participants will also be eagerly watching the latest inflation data for the US, which will be revealed later today.

“An important short-term trend playing out in the market is the weakness in IT and strength in banking. IT is weak on margin pressure in the industry and fears of a possible US recession fallout. Banking is strong due to the strong fundamentals of the banking segment and the impressive credit growth underway in the economy,” he added.

However, there are still threats to the world’s equities markets, and any changes appear insignificant in advance of the highly anticipated US inflation data in June, which, according to a Reuters poll of economists, likely surged to a 40-year top of 8.8% from a year ago.

“Sharp weakness in oil prices in July suggests that June’s (inflation) may mark a peak, however. If so, the most dynamic phase of Fed tightening could conclude with a 75bps rate rise on 27 July,” said analysts at ANZ.

“However, we expect that underlying strength in core inflation and still deeply negative real policy rates mean 50bps rate rises will still be appropriate after the summer.”

In order to counteract rising prices, the US Federal Reserve would likely view a high inflation figure as a signal that it must continue raising interest rates aggressively, even if doing so might push the economy into a recession.

Fears that rising rates may impede global economic growth have had a significant impact on stock market declines this year, while the safe-haven dollar has gained most in currency markets.

Investors were still watching to see if the euro will drop to or below 1 US dollar for the first time since 2002 when it was trading at $1.00265 on Wednesday morning.

According to Reuters, the euro fell as low as $1.00005 on Tuesday but was able to maintain just above parity with the dollar.