Sensex and the Nifty both turn green after reversing course

On Tuesday, benchmark equity indexes reversed direction and nudged higher as inflation data calmed investors’ fears. Still, there are downside concerns, as Wall Street hit a bear market milestone on worries of an approaching recession, which scared global markets.

After falling in the previous two sessions, the Sensex and Nifty had another tough start on Tuesday.

However, as inflation figures in Asia’s third-largest economy fell in May, the 30-share BSE Sensex rose over 200 points, while the broader NSE Nifty rose about 70 points.

After reaching an eight-year high of 7.79 percent in April, retail inflation fell to 7.04 percent in May, but remained above the Reserve Bank of India’s tolerance zone for the fifth month in a row, implying that rate hikes will resume in August.

After falling 11.6 percent so far this month, the Nifty IT index was up 0.9 percent. With a gain of 1.3 percent, Infosys led the Nifty 50 index higher.

The Nifty metal index was up 0.7%, with Ratnamani Metals and Tubes leading the way with a gain of 2.4%.

However, there are still risks on the downside.

The MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.9 percent early Tuesday. The S&P/ASX200 index of Australian equities fell 5% in early trade, while the Nikkei stock index of Japan fell 1.74 percent.

The gloomy mood in Asia follows a gloomy session in the United States on Monday. The Federal Reserve is expected to raise rates by 75 basis points at its policy meeting on Wednesday, according to Goldman Sachs.

“The US will see rate rises faster and higher than Wall Street has been expecting,” James Rosenberg, Ord Minnett advisor in Sydney, told Reuters. “There will likely be the double impact of earnings forecasts being trimmed and further price to earnings derating.”

Expectations for aggressive US rate hikes grew after inflation surged by a faster-than-expected 8.6% in the year to May, the highest rate in almost four decades.

Fears of increasing interest rates triggering a US recession sent the S&P 500 down almost 4%, the Nasdaq Composite down about 4.7 percent, and the Dow Jones Industrial Average down around 3%.

The S&P 500 index is now down more than 20% from its most recent record closing high, indicating a bear market.