Sensex, Nifty Start On A Positive Note, Despite Gloomy Global Stocks

Indian equity benchmarks started Monday on a positive note, despite sluggish global stocks after a stunning US payrolls report pushed back against talk of recession but bolstered the case for more super-sized rate hikes.

The 30-share BSE Sensex index and the broader NSE Nifty extended gains from Friday when the bourses ended the week on a high after the Reserve Bank of India hiked its key lending rate to the highest since 2019, by 50 basis points – larger than broadly predicted – marking the third increase in a row.

But trading could be volatile, with global risks assets predicted to see-saw between gains and losses on differing bets on the US Fed’s rate hike path and recession risks.

But blockbuster US jobs data pushed markets to move in quickly and price around a 70 per cent chance the Federal Reserve would lift rates by 75 basis points in September, sending two-year yields up 20 basis points on Friday and further inverting the curve.

That risk haunted equity markets, with S&P 500 and Nasdaq futures down 0.3 per cent in early trade.

MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent after three sessions of gains. Japan’s Nikkei eased 0.3 per cent and South Korea’s 0.4 per cent.

“Despite sluggish growth and an expected slide to a 0.2 per cent m/m July CPI gain, the Fed will likely raise policy rates 75 bps at its September meeting,” Bruce Kasman, head of economic research at JPMorgan, told Reuters.

“The key question is whether it will decide that a material rise in the unemployment rate is necessary to achieve its objectives,” he warned. “If this is the case, its guidance on rates will move significantly higher, alongside a message that it will likely prove to be less sensitive to near-term growth disappointments,” he added.