Sensex Gains Slightly In Early Trade, Propped By Easing Retail Inflation

Indian equity benchmarks rose on Tuesday, reversing some losses from an extremely volatile session on Monday as data indicating that annual retail inflation declined to a three-month low in October increased expectations for smaller interest rate increases from the Reserve Bank of India.

The BSE Sensex index rose 70.13 points to 61,694.28 in early trade, and the broader NSE Nifty index opened in the green.

In the previous session, both benchmarks fell after see-sawing through most of the session between losses and gains as investors booked some profits, following a blistering rally on Friday.

Data released after market close showed retail inflation eased to a three-month low of 6.77 per cent in October, down from a five-month high of 7.41 per cent in September.

India’s central bank looks at retail inflation mainly to frame monetary policy, and any cooling in price pressures is a positive sign for the Reserve Bank of India fighting elevated inflation and trying to stimulate the economy simultaneously. 

In addition, more than 1,000 businesses released their quarterly results on Monday as the nation’s month-long earnings season came to an end. Most of them reported profit increases and hinted to brighter times ahead despite the global slump, according to Reuters.

Futures contracts for the S&P 500 and the Nasdaq 100 were higher, and a measure of Asian stocks was headed for its best level in two months on Tuesday even as investors waited to assess China’s economic data and the Federal Reserve’s interest-rate path.

That positivity for risk assets in the near term can be attributed to expectations that the US Fed will slow the pace of rate hikes.

A day after Fed Governor Christopher Waller indicated the endpoint of the cycle was “far off,” Fed Vice Chair Lael Brainard stated that the US central bank will likely soon reduce its rate hikes but highlighted that they had “more work to do.”

“It’s certainly a time to be thinking about a recovery regime unfolding for markets,” Kristina Hooper, Chief Global Market Strategist at Invesco, said on Bloomberg Radio. “But it’s going to take a little time before we know if this really is something of a turning point for inflation and the Fed can be a lot more comfortable about hastening the end of tightening.”

Despite a slowdown in the Chinese economy in October and below-estimated industrial output, the support to the battered real estate market and some relaxed anti-virus measures have helped to boost confidence.

Following a meeting in Bali, Indonesia, where US President Joe Biden and Chinese Premier Xi Jinping advocated for lowered tensions between the two largest economies in the world, Chinese stocks listed in the US have extended their climb to a third day.

Still, despite the encouraging developments in Asia and hints of a slowing inflation in the US, the global economy is hampered by rising borrowing costs.

The cumulative impact of prior interest-rate hikes will continue to weigh on growth and corporate profits, according to Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, who recommends that investors take a defensive position, told Bloomberg.