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Mumbai: Indian stocks rebounded on Tuesday, in line with global equities, on hopes that a slowdown in China’s economic growth could prompt that country’s policymakers to unveil remedial measures.

Overall, though, the news from China doesn’t bode well for markets around the world which, analysts say, will be sensitive to events and data flow from the world’s second-largest economy.

The BSE’s 30-share Sensex rose 1.21% to 24,479.84 points, while the National Stock Exchange’s 50-share Nifty gained 1.14% to 7,435.10 points.

Global markets advanced on Tuesday after data showing China’s economy grew last year at its slowest pace in 25 years triggered hopes that the Chinese policymakers may put in more effort to accelerate growth.

Still, concerns about their ability to boost a slowing economy have rattled investors this year—especially after a plunge in Chinese stock markets and the yuan raised concerns that growth could be slowing more rapidly than previously thought.

The Chinese economy grew 6.9% last year, a tad short of government expectations of 7%, but much lower than the 7.3% growth in 2014.

An analyst sought to temper expectations of a big bailout.

“I don’t expect any major stimulus, rather gradual monetary stimulus and some targeted sector-specific action as we have seen before (from China)," said Helsinki-based Hertta Alava, director of emerging market funds at FIM Asset Management Ltd.

“(China GDP) numbers were a slight miss, but considering recent market fears and sell-off, I would say that these figures are in-line with the soft landing scenario," Alava said in an e-mail.

Since the start of the year, the Sensex has shed 6.27%, while Nifty has dropped 6.43%; both are down 18.5% from their peak levels on 4 March 2015.

On Monday, Sensex tumbled as much as 1.28% in intra-day trading to its lowest level since May 2014, while Nifty slid 1.36% to test its lowest since June 2014. Both indices recovered lost ground and closed higher.

Foreign institutional investors (FIIs) have sold a net of $1.12 billion of Indian shares since the start of the year, the most in the same period since at least 1999.

“The impact of China is very high on the global markets in the near term. Chinese policymakers may keep possibly intervening to ensure there is no sharp slowdown in growth and sentiment," said Gautam Chhaochharia, head of research at UBS Securities India Pvt. Ltd.

“That said, any negative development in China would continue to hammer emerging and Asian markets, including India, in the near term," added Chhaochharia.

Indeed, news flow from China will affect sentiment on all emerging markets, said Alava of FIM.

“But equally importantly I am following US markets and the result season there. We should see evidence that US growth is still strong, which could help US markets to bounce back and increase the risk appetite generally," he added.

Still, the worst may be over, he said.

“Both emerging markets and global markets look oversold to me, so I think that we have seen the worst already and markets should at least stabilize."

In a note on Tuesday, rating agency Standard and Poor’s (S&P) said that China tops the list of emerging market economic concerns.

“Economic growth is unlikely to boost the support for most Asia-Pacific sovereign credit ratings this year. Moreover, sovereigns in emerging economies that rely on external funding could see higher financing cost amid a less-welcoming international funding environment," S&P said in a note.

Even in the case of India, where direct linkages (corporate and trade) with China are relatively lower, the impact of the Chinese slowdown continues to play out through market channels.

“A slowdown in China is not a key factor for the credit profiles of most rated Indian companies because these companies target the domestic or developed markets," S&P credit analyst Mehul Sukkawala said in another note.

“That said, any further slowdown in China could trigger significant turbulence in the global financial and commodity markets and hurt Indian companies," he added.

Reuters contributed to this story.

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