Sensex Rallies Over 1,000 Points After UK's Policy U-Turn On Tax Cuts
Indian equity benchmarks recovered sharply on Tuesday from deep losses in the previous session, tracking improving global market sentiment after the UK's policy U-turn decision to roll back the planned tax cuts for top earners that had sent the gilt market into financial markets into a tailspin last week.
The BSE Sensex index rallied 1,028.28 points to rebound to 57,817.09 in early trade from 56,788.81 on Monday, and the broader NSE Nifty jumped 320.3 points to 17,207.65.
After a 10 per cent surge in the previous quarter, including their biggest single-day jump in a month on Friday, both Indian benchmark bourses crashed at the start of October on Monday, driven by global stocks languishing at their lowest levels since late 2020.
The market mood was fragile on Monday as crude prices jumped on a potential cut in production by oil producers, exacerbating fears of even higher inflation and a stronger policy response from central banks around the world would increase the likelihood of a global recession.
While crude prices held steady, as a result of Britain's decision to partially abandon its tax-cut plan, sentiment improved for global stocks and risk assets on Tuesday.
"The about-face...will not have a huge impact on the overall UK fiscal situation in our view," John Briggs, Markets' Head of Economics and Markets Strategy at NatWest, told Reuters.
"(But) investors took it as a signal that the UK government could and is at least partially willing to walk back from its intentions that so disrupted markets over the past week," he added.
What also helped a surge on Wall Street, which sparked a risk-on attitude globally, was poor US manufacturing data on Monday that eased concerns about further aggressive Federal Reserve rate hikes.
Tuesday saw a rebound in Asian bourses led by a 2.5 per cent increase in Australia, with the MSCI's index of Asia-Pacific shares outside of Japan up 1 per cent in trade thinned by holidays in China and Hong Kong.
Despite North Korea firing a long-range missile over Japan for the first time in five years, the Kospi in South Korea rose over 2 per cent, moving away from last week's two-year low.
US equity futures increased following the S&P 500's best day since July.
But other indicators point to more signs of market stress. The CBOE Volatility Index is still above 30 and is very high, underscoring wider expectations for more wild gyrations in financial markets.
