Sensex, Nifty Rebound To Close Higher, Snap Two Session Losing Streak

Indian equity benchmarks recovered to close on a higher note on Tuesday, reversing earlier losses to end the two-session losing streak as positive Wall Street futures put a floor under risk assets, despite preliminary business activity data pointing to recessionary risks.

After nose-diving in the previous session and earlier on Tuesday, the 30-share BSE Sensex index recovered to gain 257.43 points, or 0.44 per cent, to close at 59,031.30, and the NSE Nifty index rose 86.70 points, or 0.5 per cent, to 17,577.50.

The Sensex index had plunged 324.85 points. or 0.55 per cent, earlier in the session, and the Nifty had opened 115.70 points, or 0.66 per cent, lower.

"This could be a pullback rally before derivative settlement on Thursday," AK Prabhakar, head of research at IDBI Capital, told Reuters. "We need to give it time to see if this recovery will sustain."

The Nifty Auto index increased 1.8 per cent. Mahindra and Mahindra gained 3.8 per cent, and Eicher Motors finished the day 3 per cent higher.

The Nifty Bank index ended the session 1 per cent higher as banks increased. The Nifty IT index fell 1.7 per cent, making IT equities stand out as laggards.

After media reports that the IT giant had decreased average variable payout to 70 per cent for the first quarter due to margin pressure, Infosys Ltd lost 2.1 per cent and was the top percentage loser on the Nifty 50 index.

From the Sensex pack, Mahindra & Mahindra, Bajaj Finserv, Titan, Tata Steel, State Bank of India, Kotak Mahindra Bank, Sun Pharma and IndusInd Bank advanced.

On the other hand, Tata Consultancy Services, Infosys, HCL Technologies, Hindustan Unilever, Tech Mahindra, Wipro and HDFC Bank were the major laggards In Asia, markets in Seoul, Tokyo, Shanghai and Hong Kong ended lower.

The euro hit a 20-year low versus the dollar as weaker economies in Germany and France added to pressure from decades-high inflation and rising gas costs that were pushing Europe into recession.

Indeed more pressure was piled on markets after the S&P flash composite Purchasing Managers' Index (PMI), which tracks manufacturing and services, showed that a downturn in Germany, Europe's biggest economy, deepened in August due to high inflation and rising interest rates.

"The PMIs are going to feed into the pessimistic narrative," Michael Hewson, chief markets analyst at CMC Markets, told Reuters.

The MSCI global stock index was down 0.2 per cent. 

Rising US stock index futures helped to offset the bad economic data, keeping the STOXX index of European corporate shares from falling. That index has been declining for about a week, and it is currently 11 per cent below its all-time high from January 4.

"I can't see the Ukraine war coming to an end anytime soon, that would be the catalyst for a market rally. That is going to keep pressure on energy prices and as for the euro, the only way is down," CMC Markets' Mr Hewson said.

Benchmark gas prices in the European Union doubled in just one month to reach a record high that is now 13 per cent higher than the average over the previous ten years.

According to Monica Defend, chairman of Amundi Institute, central bankers misled investors by suggesting that inflation would be a passing blip at the previous conference. Instead, price increases have been bigger, longer-lasting, and more broadly based, she said.

On wagers that the US Federal Reserve will "pivot" away from its rate-rising path next year, the markets had started to recover.

But markets now expect the Fed will remain hawkish when its chair Jerome Powell addresses the annual Jackson Hole meeting of global central bankers on Friday, ING bank said.