Indian equity benchmarks climbed to over five-month highs early Thursday, tracking a pullback from a deep sell-off in global stock markets even as recession risks have risen from expectations for more aggressive central banks' action following steep inflation readings.
The BSE Sensex index rose 329.15 points to 60,676.12, and the NSE Nifty advanced 92.4 points to 18,096.15.
That comes a day after both benchmarks had registered their biggest intraday fall in over two weeks and stalled a four-session winning streak.
The Nifty Bank index increased by 1.1 per cent to reach a new high and was on pace to post gains for a sixth straight day.
State Bank of India, the largest lender in the nation, and ICICI Bank, a competitor in the private sector, were at record highs.
The Nifty 50's greatest percentage gainer was the automaker Maruti Suzuki India, which increased by as much as 3 per cent to a two-week high.
Before the morning bell, Prashanth Tapse, Senior Vice President for Research at Mehta Equities, said, "after yesterday's retreat, local shares are likely to start on a positive note tracking recovery in most of the Asian indices following the overnight uptick in the US markets."
"Intra-day, the markets may waver as the nervous theme could play out in the backdrop of consensus that inflation is falling more slowly than expected. Strong inflation numbers have revived bets for faster interest rate hikes by the central banks across the globe," he added.
Meanwhile, Fitch Ratings slashed its prediction for India's gross domestic product growth for the current fiscal year from 7.8 per cent to 7 per cent, citing a slowdown brought on by red-hot inflation, tighter monetary policy, and global economic stress.
The mood in global equities reflected a somewhat cautious risk-taking appetite, albeit fragile, driving Asian stocks higher a day after their biggest sell-off in three months on the prospect of the Federal Reserve announcing a 100 basis point interest rate hike next week to tackle red-hot inflation.
"Equity markets are presently in no man's land," Sean Darby, global equity strategist at Jefferies in Hong Kong, told Reuters. "Better macro news to support earnings is discounted as the need for further tightening to quash growth – while CPI prints are not declining fast enough," he said.
"The best metaphor is that the Fed is not only driving the economy using a rearview mirror but is now being forced to press the 'rate rise' accelerator just as bond markets are discounting an overtightening," he added.
Japan's Nikkei rose 0.3 per cent, while MSCI's broadest index of Asia-Pacific shares outside of Japan was 0.4 per cent higher.
Benchmarks rose in South Korea and Australia. Hong Kong indices edged higher after the People's Bank of China maintained its benchmark rate at its record level.
US futures were trading higher after the S&P 500 ended the session in the green, thanks to late-afternoon drop buyers.
The quiet mood coincides with data showing that producer prices in the US decreased for a second month, offering some respite from the shock of consumer price data that spurred investors to increase their bets on the quantum and the number of rate hikes in this cycle.
"I think you want to begin to add risk back into your portfolio," Nancy Tengler, Chief Executive and Chief Investment Officer at Laffer Tengler Investments, said on Bloomberg TV.
"I do think, despite the CPI number we got the day before yesterday, we are approaching or at peak inflation, and historically it has always been appropriate and good for your portfolio if you added to equities when we hit peak inflation."
That suggests the latest sell-off in global equity markets may have been a recalibration of those expectations rather than panic selling, as suggested by the lack of a spike in the VIX index, also known as the "fear gauge."
"The steer from yesterday's equity futures proved an accurate one, and US equities made small gains yesterday. A further modest recovery is indicated today," said Robert Carnell, Regional Head of Research for Asia-Pacific at ING.