Stock market opened in green as data from US shows receding inflationary pressure; Sensex rises almost 2%, Nifty advances 260 points

The domestic benchmark indices opened in green on Monday, bouncing back from Friday’s losses as data coming out of the US lifted the mood on D-Street. Sensex closed below the 60,000 mark at 59,900 points in the last trading session and Nifty closed below the 18,000 mark at 17,859 points.

The BSE Sensex opened 250 points higher to 60,147 points, while NSE Nifty-50 opened almost 100 points higher to 17,952 and Nifty Bank started trading 216 points higher to 42,404 points from the previous close.

As of 12:30, Sensex went up by almost 900 points or 1.5% to 60,802 points, whereas Nifty gained 250 points or 1.42% to 18,113 points and the banking gauge Nifty Bank is trading at 42,633 points, up 444 points or 1.05%.

Commenting on Monday’s market outlook, Prashanth Tapse, Research Analyst, Senior VP (Research) at Mehta Equities, said, “A strong positive opening is on the cards for local equities on Monday after US markets notched up significant gains on Friday. This would bring some respite as markets were extremely volatile to negative last week amid worries of a slowing global economy, higher interest rates, and elevated inflation levels.”

Wall Street rallied on Friday after the December non-farm payroll data showed that the US economy added 223,000 jobs last month, slightly higher than the expected 200,000 jobs economists polled by the Dow Jones expected. Wages, however, grew slower than expected, increasing 0.3% on a monthly basis rather than the anticipated 0.4%.

The ISM’s Services PMI showed that the economy is cooling off and Fed’s monetary policy has started exhibiting its intended impact on inflation. It fell to 49.6 in December from 56.5 in November and according to the report, a reading below 50 signals contraction in the sector.

The Dow advanced 700 points or 2.13%, while S&P 500 rose 87 points or 2.28% and Nasdaq Composite added 2.6%, or 264 points on Friday.

Michael Arone, chief investment strategist at State Street Global Advisors, said, “All investors care about is that the data suggests inflation is moving towards the Fed’s target. That’s all investors care about and average hourly earnings suggest inflation continues to slow. They are excited about that.”

However, some analysts advise taking this news with a pinch of salt and cautioned against investors’ bet that the latest data might push the Fed to become less hawkish.

Referring to job data, Randy Frederick, managing director of trading and derivatives at Charles Schwab in Austin, Texas, said, “Everything else about this shows a very, very resilient labor market which doesn’t bode well for a smaller rate hike. The odds have been relatively low that we would get a half a point (of rate hike) on Feb. 1, but those odds are going up every day based on all this data.”