Indian equity benchmarks took a conservative stance to start the week, following a strong surge on Friday as investors reviewed and reallocated their positions amid an improvement in market risk sentiment.
Early trading saw a 75.38 point decline in the BSE Sensex index to 61,719.66 while the larger NSE Nifty gained 0.02 percent to 18,353.12.
Data on domestic retail inflation that will be released after the trading day’s hours will probably also control the markets.
The Federal Reserve abruptly changed its policy course for the upcoming year last week in response to lower-than-anticipated US inflation statistics for October, which caused the dollar to plummet and ignited a significant rally in stocks, risky assets, and bonds.
The two-year Treasury yield plunged 30 basis points on Friday, the most since 2008, while the Nasdaq gained 8% for the week. The dollar also declined 4%, making it the fourth-biggest weekly decline since the era of freely floating exchange rates began more than 50 years ago.
However, Asian markets began on Monday with little movement, suggesting that investors were still reeling after one of the most dramatic weeks in recent market history.
The MSCI’s broadest index of Asia-Pacific shares outside of Japan gained by 0.2% after surging 7.7% the previous week.
While Japan’s Nikkei index remained constant, the stock market in South Korea increased by 0.3%. S&P 500 futures decreased 0.2% while Nasdaq futures declined 0.3%.
Governor of the Federal Reserve Christopher Waller’s Sunday statement that the US inflation figure from the previous week was “only one data point” and that additional readings of a similar nature were necessary to show that inflation was declining did not help.
Mr. Waller added that the Fed might start to think about raising rates more gradually.
“The CPI downside surprise aligns with a broad range of indicators pointing to a downshift in global inflation that should encourage a moderation in the pace of monetary policy tightening at the Fed and elsewhere,” Bruce Kasman, Head of Economic Research at JPMorgan, told Reuters.
“This positive message needs to be tempered by the recognition that downshifts in inflation will be too little for central banks to declare mission-accomplished, and more tightening is likely on the way” he added.
Traders were also keeping an eye on Chinese stocks to see whether the sharp rise may continue following reports that banking institutions had been ordered by regulators to extend additional support to struggling real estate developers.
Several COVID restriction changes led to a rise in blue chips on Friday, despite China reporting more incidents over the weekend.
The regular deluge of economic data and policymaker statements will fill the upcoming week as market players recover, evaluate, and realign.
Additionally, US Vice President Joe Biden and Chinese President Xi Jinping will have their first face-to-face meeting since the US President took office on Monday at the G20 summit in Bali.
It’s fair to say that relations between the two superpowers are chilly, so any signs of thawing could support the positive market vibe that has been spreading since last week.