The markets opened in the red and slid further during early trade on Wednesday morning. Sensex opened over 200 points in the red, while Nifty traded below 7,800.
However, the markets bounced back by the afternoon trading in the green, making up for the early morning losses. Power, healthcare, oil & gas, IT and realty sectors pushed the markets up amid recovery in other Asian markets. Capital goods and banking sectors witnessed continued selling. Sensex managed to hover above the 26,000 mark and Nifty traded just below 7,900 after recovery.
Asian stocks were up in early trade but slumped as the day progressed. Chinese stocks witnessed volatile trade and fell despite the rate cut by the central bank. Shanghai Composite index closed 1.27 per cent down as investor confidence remained frail despite fresh monetary stimulus.
On Tuesday China’s central bank cut key lending rates by 0.25 per cent to calm the falling stocks. This was the fifth rate cut that China saw since November 2014. Shanghai fell by a whopping 16 per cent this week. This shattered the world markets in the last two days.
European and US shares rebounded after news of China’s cut interest rates reached them on Tuesday. Wall Street immediately jumped rallying after a five-day streak of losses.
Around Tuesday midday in New York, the Dow Jones Industrial Average was up 2.38 per cent, the broad-based S&P 500 gained 2.48 per cent, and the tech-rich Nasdaq Composite Index rose 3.29 per cent.
“I’m not surprised to see the market move up, given the magnitude of the sell-off we’ve seen the past four days and the moves made by China after the market close in terms of cutting rates,” Michael James, managing director of equity trading at Wedbush Securities Inc in Los Angeles told Bloomberg News on Tuesday.
“The question is whether these levels will hold, and the only guarantee is another day of volatility,” he added.
Fear of an economic slowdown in China, the second largest economy in the world, has spooked the world markets. It all started with the sharp depreciation of yuan two weeks ago. A string of weak economic data from the country further added to the blow. Thus on Monday world markets tanked losing trillions of dollars.
On Tuesday Chinese Premier Li Keqiang promised that the yuan would maintain a stable level and not weaken further.