Nifty, Sensex On Track For Fifth Consecutive Week Of Gains, Defying A Global Gloom Trend

Indian equity benchmarks opened marginally higher on Friday and are on track to extend their weekly gains for the fifth week in a row even as the debate on US Federal Reserve's policy path continues. 

The NSE Nifty index and the 30-share BSE Sensex index opened in the green, bucking a broad global gloom trend for the second consecutive day. 

The Sensex index climbed 113.2 points to 60,411.20 in early trade and the Nifty gained 35.7 points to 17,992.20.

Both the benchmark indices are volatile, with the Sensex and the Nifty swinging between gains and losses.

From the Sensex pack, Tech Mahindra, Kotak Mahindra Bank, Wipro, Tata Consultancy Services, Larsen & Toubro, HCL Technologies, Infosys, Titan, Sun Pharma and UltraTech Cement were among the major gainers in early trade.

On the other hand, IndusInd Bank, Power Grid, ICICI Bank, NTPC and State Bank of India were among the biggest laggards.

Still, Indian equity benchmarks have extended their bull run into the fifth straight week, with the Sensex and Nifty indexes ending Thursday on a more than four-month high. 

Tracking the recent rally in equities, the market capitalisation of BSE-listed firms jumped to a new record high of ₹ 2,80,52,760.91 crore on Thursday. Earlier on January 17, the market capitalisation (m-cap) of BSE-listed firms had reached a lifetime high of ₹ 2,80,02,437.71 crore.

"Recent gains in Indian indices have been helped by a combination of factors including encouraging macro data, fall in commodity prices, slowing inflation that may lead to central banks globally softening their monetary policy stance earlier than expected etc," Dhiraj Relli, MD and CEO at HDFC Securities, told ANI.

"Return of buying by FPIs has also helped. The steepness of the rally from the lows of June 2022 without any major correction on the way has been beyond the expectations of most investors. This also reflects the relative strength of the Indian markets amidst the global turmoil," he added.

According to a government statement, India on Thursday increased fuel export taxes after slashing them just over two weeks prior and decreased a windfall tax on locally produced crude oil.

Shares of oil-to-telecoms conglomerate Reliance Industries Ltd fell 0.6 per cent. Oil producer Oil and Natural Gas Corp and miner Vedanta Ltd were up 1.3 per cent and 0.5 per cent, respectively.

The Nifty IT index was up nearly 1 per cent, while the Nifty Bank index fell 0.26 per cent.

"Some profit booking and diversion of money to fixed income may be considered as a short-term strategy. Buy on dips can be considered in high-quality financials, leading names in capital goods and autos," V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told ANI.

Asian markets were left in limbo on Friday as recession clouds gathered over Europe, highlighting the relative strength of the US economy, the US dollar made all the moves. 

The MSCI's broadest index of Asia-Pacific equities outside of Japan fell 0.3 per cent, to be down 1.1 per cent on the week, as new worries about the health of China's economy emerged.

South Korea lost 0.5 per cent, while the blue chips in China were unchanged. With a 0.3 per cent increase, Japan's Nikkei performed better, partly due to the yen's continued decline.

The "R" alarm is ringing in Europe, where natural gas prices reached all-time highs on Thursday, adding to an inflation pulse that will undoubtedly lead to more painful policy tightening and increase the likelihood of a recession.

London's FTSE futures increased 0.2 per cent while Europe's EUROSTOXX 50 futures fell by 0.1 per cent.

After repeatedly failing to break through the 200-day moving average, S&P 500 futures slid 0.1 per cent and were barely changed for the week, while Nasdaq futures fell 0.2 per cent.

No less than four US Federal Reserve officials warned that there was still work to be done on interest rates, with the main difference being how fast and high to go. This raised the possibility of greater borrowing costs looming over the markets.

Market expectations point to a September half-point increase and a one-in-three likelihood of 75 basis points (bps). Rates are anticipated to peak at 3.5 per cent or higher; however, some Fed members are pushing for 4 per cent or even higher in this tightening cycle.

"There are no signs that the labour market or inflation data are slowing sufficiently for the Fed to declare victory on inflation," Brian Martin, head of G3 economics at ANZ, told Reuters,

"We see upside risks to the Fed's inflation projections, and we expect these and the dot plot to be revised up in September," he added. "We have revised up our year-end fed funds rate forecast by 25 bps to 4.0 per cent and now expect three 50 bps hikes over the remainder of 2022."

All of that emphasises the significance of Fed Chair Jerome Powell's address on August 26 in Jackson Hole, which is often a landmark occasion on the central bank calendar.

With two-year yields 34 basis points lower than 10-year yields and recession indicators blazing, the bond market is unmistakably on the hawkish side.

Oil prices were a little steadier on Friday but still down on the week, with Brent having touched its lowest since February at one point on concerns about demand.

Brent was up a slim 2 cents at $96.61, while US crude rose 5 cents to $90.55 per barrel.