Indian equity markets rose about 1 per cent on Friday, recovering some of the losses suffered during the week marked by intense volatility driven by fears of a recession in the US.
The Sensex increased by 820 points (1.04 per cent) to 79,706, while the Nifty gained 251 points (1.04 per cent) to 24,368, tracking a global recovery in equities, as a decline in US employment claims eased recession concerns.
Despite Friday’s gains, both indices ended the week with losses for the second consecutive week.
The Sensex fell 1.6 per cent, and the Nifty 1.4 per cent, marking their biggest weekly decline since the week ended June 2.
US data showed that applications for unemployment aid had declined to their lowest level in a month. The jobless benefit claims for the week ended August 3 came in at 233,000, compared to 250,000 the previous week.
This data offered some relief after last week’s jobs report revealed that the US had added fewer jobs than expected, triggering fears about a recession and a shift of investment towards government bonds.
The jobs data had also raised concerns that the US Federal Reserve could be lagging in cutting interest rates. Despite Friday’s recovery, markets could remain turbulent amid debates over whether the US economy will see a hard landing.
Hopes of a soft landing — or the Fed taming the inflation without triggering a recession — had recently driven gains in global equity markets. However, mixed signals from US monetary policymakers are making investors cautious.
Kansas City Fed President Jeffrey Schmid indicated this week that he was unlikely to support a rate cut until inflation reaches the Fed’s target levels. Boston Fed President Susan Collins said the US central bank could cut rates if inflation continues to decline.
“Markets were looking for some positive news on jobs. The concerns are unlikely to disappear, and jobs data will become increasingly important in the coming weeks. We will continue to be led by global events. Earnings have not been impressive. The RBI has maintained a hawkish stance. There is no strong reason for our markets to move higher,” said Andrew Holland, chief executive officer of Avendus Capital Public Markets Alternate Strategies.
India VIX, a volatility indicator, declined by 7.6 per cent to 15.4. Stocks with significant global exposure saw gains, with the Nifty IT index rising by 1.5 per cent.
Asian markets also recovered, with Japan’s Topix and South Korea’s KOSPI gaining 0.8 per cent and 1.24 per cent, respectively. The total market capitalisation of BSE-listed firms increased by Rs 4.5 trillion, though it remained Rs 7 trillion lower compared to the previous week, standing at Rs 450 trillion.
Vinod Nair, head of research at Geojit Financial Services, said: “Investors should shift focus from growth stocks to value stocks due to subdued earnings and a lack of fresh triggers.”
Foreign portfolio investors were net buyers of Rs 407 crore, while domestic institutions purchased shares worth Rs 3,980 crore. Overall market breadth was positive, with 2,283 stocks advancing and 1,626 declining. All BSE sectoral indices ended with gains. Among Sensex components, Tech Mahindra, Tata Motors, and M&M were the biggest gainers, while Kotak Mahindra Bank and Sun Pharma were the only losers in the 30-share index.
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