Equity benchmarks rose sharply on Thursday to end a two-session losing streak even as global stocks pared earlier gains and the euro slipped bac below parity with the dollar ahead of the European Central Bank meeting and Federal Reserve Chair Jerome Powell's speech later in the day.
The 30-share BSE Sensex index rose 659.31 points, or 1.12 per cent, to end at 59,688.22, and the broader NSE Nifty-50 index climbed 174.35 points, or 0.99 per cent, to 17,798.75.
Oil prices falling to almost seven-month lows on demand worries helped investors' confidence in local equities, and both benchmark indices reached close to three-week highs throughout the trading session.
A fall in crude prices helps the country's inflation as it imports over 80 per cent of its needs.
"Even with the muted global cues, domestic equities look to be doing well on fall in oil prices," Anita Gandhi, director at Arihant Capital Markets told Reuters, adding that valuations looked attractive due to a recent correction.
The Nifty IT index and bank indexes were the top two Nifty sub-indices gainers, rising by 0.9 per cent and 2.5 per cent, respectively, while the metals index fell 0.9 per cent.
The Nifty 50 index's top performers were Shree Cement and Bharat Petroleum Corp, which saw gains of 5.5 per cent and around 4 per cent, respectively.
The largest gainers among the Sensex shares included Tech Mahindra, Axis Bank, ICICI Bank, Mahindra & Mahindra, Bharti Airtel, State Bank of India, UltraTech Cement, Bajaj Finserv, IndusInd Bank, and Asian Paints.
The laggards were Tata Steel, NTPC, Titan, Nestle, and Power Grid.
"Domestic financial markets experienced a wave of optimism tracking strength across global markets as oil prices eased, cooling investor concerns about rising inflation. Despite premium valuations, consistent FII inflows are aiding Indian bourses to stay resilient," Vinod Nair, Head of Research at Geojit Financial Services, told PTI.
Earlier, both benchmark indexes started the day sharply higher, tracking a surge in Asian bourses mirroring a rally in Wall Street overnight.
The MSCI index of Asia-Pacific stocks outside of Japan recover after dropping to lows last seen in the aftermath of the 2020 pandemic.
But investors were wary of a record 75 basis point interest rate hike by ECB later Thursday, which caused European stocks to give up some of their early gains and euro to languish below parity with the greenback.
The European Central Bank assumes the spotlight, with Bloomberg Economics anticipating a 75 basis point rate increase to front-load tightening even as the region struggles with an energy crisis.
“What we are seeing in Europe is very, very concerning, what is happening there is the worst energy crisis we have seen since the oil embargo in 70s,” Ryan Lemand, Securrency capital advisor to the board, said on Bloomberg Television. “Europe will face a recession, one of the worst recessions it will have faced and I don't think risky assets are pricing this in correctly.”
While attempting to quickly address price pressures, central banks are treading carefully so as not to cause an unfavourable economic contraction.
Paul Hollingsworth, Chief European Economist at BNP Paribas Markets 360, told Reuters that markets were largely expecting a 75 basis point ECB hike following recent signals from some of its top policymakers.
"The fact that we are not at the peak of inflation in Europe yet is important here," Mr Hollingsworth said.
"If they do deliver the 75 bps, it is likely that we will see more hikes priced in and we could see the euro rally a bit, but we would look to fade that," he added, due to the upcoming recession and winter energy crisis.
Markets were also watching for any hints of a change in the Fed's stance on its growing inflation during a speech by Chairman Jerome Powell later in the day.
"The markets will probably adopt a wait-and-see approach in the short run," Gary Ng, Senior Economist at Natixis in Hong Kong, told Reuters.
"Whether it's 50 or 75 basis points will be important, but the most important thing is really about whether inflation can peak, and what is the rate hike path of the Fed going forward?"
On concerns about the possibility of a global recession, oil prices modestly recovered from an overnight drop but stayed below $90 a barrel for the first time since Russia invaded Ukraine in February.
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