Stock benchmarks have been highly volatile, swinging between gains and losses early Monday, following Friday’s carnage when the Sensex crashed 1,100 points and the Nifty fell more than 2 percent, driven by a looming recession of the broadest and most aggressive policy tightening in decades.
The 30-share BSE Sensex index opened in the green, then fell about 50 points, but then recovered to finally rise more than 100 points at 58,948.64.
Similarly, the broader NSE Nifty-50 index opened in the green, immediately gave in a few points and was last about 40 points higher at 17,668.50.
Shares of Oil & Natural Gas Corp rose 1.4 percent after India cut windfalls on domestic crude oil production on Friday.
The main laggards in early trading of the Sensex pack were UltraTech Cement, Asian Paints, Titan, Dr. Reddy’s, Tata Steel, HCL Technologies, Maruti and ICICI Bank.
Trading was positive for Mahindra & Mahindra, IndusInd Bank, Infosys, Bajaj Finserv and State Bank of India.
“The short-term texture of the market has become weak and the buy-on dips strategy is unlikely to work in the current risk-free global environment. FIIs changing sellers is negative in the near term. The market is likely to take a decisive trend only after the Fed’s policy announcement on September 21,” VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, told PTI.
Global stocks were subdued early Monday after world equities had their worst week since this year’s low in June.
Extreme volatility lurks as investors gear up for a week of 13 central bank meetings that will no doubt lead to higher borrowing costs everywhere, with a chance of a particularly large rally in the United States.
The prospect of a rate hike of at least 75 basis points by the Federal Reserve forced yields on two-year US Treasuries to rise 30 basis points last week to their highest level since 2007 of 3.92 percent.
That made stocks more expensive by comparison, dragging the S&P 500 down nearly 5 percent for the week.
“How high will the funds’ interest rates eventually have to go? Our response is high enough to generate a tightening in financial conditions that slows activity enough to maintain a solid growth trajectory below the potential growth path,” Jan Hatzius, chief economist at Goldman Sachs, told Reuters.
The “dot plot” rate predictions made by Fed members are likely to be hawkish, and will be significant, and investors will be watching closely the path of the rate hike.
“We have to wait for the Fed rate hike, and then we have to understand the dot plot,” Wendy Liu, chief stock strategist Asia and China at JPMorgan Chase, told Bloomberg TV.
Due to holidays in Japan and the UK marking a day of mourning for Queen Elizabeth II, Monday’s trading session got off to a slow start with S&P 500 futures down 0.1 percent and Nasdaq futures unchanged.
“It is clear that the Fed will send an aggressive message and reiterate that it will unconditionally lower inflation,” Vasileios Gkionakis, head of European currency strategy at Citigroup, wrote in a note to clients. While the Fed’s hawkishness is already priced in, much will depend on “pre-positioning in a few days before.”
After falling more than 3 percent last week, the broadest MSCI index of Asia-Pacific stocks outside of Japan fell 0.3 percent.
Chinese blue chip stocks rose 0.3 percent after China’s central bank defied a global tightening trend and cut the repo rate by 10 basis points to stimulate the struggling economy.
But most of the other central banks meeting this week, from Switzerland to South Africa, are likely to raise interest rates.