Markets rise nearly 1% as macro trends indicate swift recovery – Mint

Stock market benchmark indices closed nearly 1% higher on Monday as investors returned to trade after a three-day Diwali break. Improvement in macro trends have boosted expectations of a faster economic recovery in the country.

The BSE Sensex ended up 477.99 points or 0.80% at 60,545.61, while the Nifty gained 151.75 points or 0.85% to 18,068.55. “Despite a muted opening, domestic indices erased early losses, boosted by favourable macros like fuel tax cut, improved PMI numbers and higher festive season sales numbers. On the global front, the Fed policy announcement was in line with the market view to start with gradual tapering, which boosted the sentiments of emerging markets. Additionally, investors remained a bit cautious ahead of US consumer data, which is to be released later this week,” said Vinod Nair, head of research, Geojit Financial Services.

The US Federal Reserve, as widely expected, announced on Wednesday that it would begin reducing its $120 billion in monthly purchases of treasuries and mortgage-backed securities at a pace of $15 billion per month, with a plan to end the purchases altogether in mid-2022.

The US central bank said it would be “patient” in deciding when to raise its benchmark overnight interest rate from the near-zero level, a counter to rising bets in financial markets that inflation would prompt the central bank to end its pandemic-era support for the economy sooner than later.

According to Michel Vernier, head of fixed income strategy, Barclays Private Bank, the Federal Reserve lacks sufficient urgency on handling sticky inflation.

“By now, chairman Jerome Powell may sound a tad too much like a broken record in the ears of the market: ‘inflation is elevated, largely reflecting factors that are expected to be transitory’, and ‘an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation’.” “The “full employment” narrative may prove to be too vague and the market may press the Fed for firmer communications in the form of higher rates at the long end, leading to some bear steepening,” Vernier said.

By the first or second quarter of next year, at the latest, Barclays sees a continuation of the flattening trend, driven by higher two-year rates.

Meanwhile, the India volatility index or VIX rose 3.76% on Monday, indicating rising anxiety among investors.

Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services Ltd said, “The markets will take direction from a number of macro events due this week including US inflation data and the UK GDP (gross domestic product) data apart from various Federal Reserve speeches. Further, this is the last week of the earnings season which would keep the markets volatile. Lot of stock-specific action would be seen in the market.”

Reuters contributed to the story.

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source: Markets rise nearly 1% as macro trends indicate swift recovery – Mint

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