Stocks rally on positive global relations, but caution first

On Friday, Sensex and Nifty rose 2.91% and 2.89%, respectively, after recording their worst declines in at least two months a day earlier.

Positive news from China, with loan rate cuts and easing of restrictions caused by the pandemic, helped boost sentiment globally.

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Finance Minister Nirmala Sitharaman’s optimism about India’s robust economic growth prospects may also partially support investor confidence, analysts said.

“Markets have fully turned from Thursday’s plunge as the bargain hunt following the recent crash and the rally in other Asian indices underpinned the homecoming sentiment. The central bank of China cut the prime rate for the 5-year loan from 4.6% to 4.45% and the easing of restrictions related to the currency also provided a big impetus to the market.” , said Amol Athawale, Vice President of Technical Research, Kotak, Securities Co., Ltd.

Asian indices Nikkei, Taiwan, Hang Seng, Jakarta Composite and Shanghai Composite ended the day with gains of 0.78-2.96%.

Arafat Saiyed, an analyst at Reliance Securities, said in India, market confidence was further boosted by Sitharaman’s suggestion that India’s economic growth could hit 8.9% in the year. finance 23.

Saiyed added that the stock market is likely to remain highly volatile amid the protracted Russia-Ukraine conflict and bitter incidents in China.

VK Vijayakumar, chief investment strategist at Geojit Financial Services, said he expects the volatility to continue and it could take weeks for the market to stabilize.

Excessive volatility is attributed to two reasons by market watchers.

The first is that markets have eased off the severe monetary tightening by the US Federal Reserve, which is likely to take the Fed’s interest rate to around 3% by 2023.

Second, markets have not yet fully discounted the possibility of the US economy falling into a recession in 2023. Until there is clarity on the latter, the ‘risk-taking regime’ is likely to continue for the time being, Vijaykumar said.

For India, continued selling by foreign institutional investors (FII) remains a key concern. While rising interest rates, tight liquidity and favorable bond yields in the US are some of the reasons why FII is selling, analysts also think India is the only emerging market where FII is benefiting. good returns and the markets provide liquidity for sale. Therefore, the selling of FII could continue to make the market volatile.

Foreign portfolio investors are still net sellers of valuable stocks 1.61 trillion through May 19.

The continuation of FII sales is also putting pressure on the rupee, as well as high crude oil prices. Brent crude was trading at $113.32 per barrel.

The rupee once again touched an all-time low of 77.7975 against the dollar on Friday and sentiment has been hit by fears that growth will be derailed globally due to inflation, interest rates rise and supply chain problems due to China locking down the currency desk of Emkay Global Financial Services.

The dollar index saw a correction from a 20-year high of $105 on weaker-than-expected economic data: US unemployment hit 10-week high and manufacturing activity Exports fell to 2.6, the lowest level since June 2020, added Emkay.

Analysts say the volatility observed this week is expected to continue, given key economic data releases, the current earnings season and the monthly deadline.

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

Shah added that data on India’s foreign exchange reserves, which have made headlines for falling to a one-year low, as well as INR/USD volatility, will be closely watched. should remain on the sidelines until a clear trend emerges.

US stocks fell as investors weighed the risks to growth from policy tightening against China’s latest efforts to shore up its economy. Treasury and dollar appreciation.

The S&P 500 index traded off session lows, after falling within 30 points of bear market territory, marked by a 20% slide from its January closing high. At the end of another volatile week, price volatility is likely to be exacerbated by the monthly expiration of options tied to stocks and exchange-traded funds.

Bloomberg contributed to the story.

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