The Indian stock market has experienced a remarkable surge, closing positively in every trading session last week. This impressive performance has allowed the Nifty 50 and BSE Sensex to achieve their largest weekly gains in four years. The Nifty 50 soared from 22,397 to 23,350, marking a significant increase of 953 points, or 4.25%. Meanwhile, the BSE Sensex climbed from 73,828 to 76,905, gaining over 3,000 points, which translates to 4.16%.
Broad Market Participation Fuels the Rally
This stock market rally was not limited to the top indices; it was a broad-based event. The BSE Small-cap index rose from 43,844 to 47,296, achieving a weekly gain of 3,452 points, or an impressive 7.90%. Similarly, the BSE Mid-cap index increased from 39,062 to 41,831, recording a rise of 2,769 points, approximately 7.10%. This suggests that the overall market is outshining the major indices.
What’s Driving the Surge in the Indian Stock Market?
Experts believe that multiple factors have contributed to this bullish momentum on Dalal Street. Here are the top five reasons behind the ongoing uptrend:
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Anticipation of RBI Rate Cuts: The market is buzzing with speculation over potential interest rate cuts by the Reserve Bank of India (RBI). Following guidance from the US Federal Reserve suggesting possible rate reductions in 2025, investors are optimistic about similar moves from the RBI in the upcoming policy meeting. According to Avinash Gorakshkar, Head of Research at Profitmart Securities, this would enhance market liquidity and boost investor confidence.
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Positive Q4FY25 Earnings Outlook: There are signs of economic recovery, with Fitch Ratings predicting increased capital spending in the forthcoming financial years. India’s GDP growth is expected to rebound, offering a favorable environment for better quarterly results in 2025.
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Strengthening Indian Rupee: The Indian Rupee has strengthened against the US dollar, surpassing the 86 mark for the first time since January, thanks to a surge in foreign investments and improved trade data. This positive movement has been bolstered by the RBI’s interventions, making the rupee one of the strongest currencies in Asia this month.
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Domestic Institutional Investors (DIIs) Active Amid Foreign Selling: In recent weeks, DIIs have been consistently purchasing shares, totaling ₹30,788.19 crore in the cash segment. In contrast, Foreign Institutional Investors (FIIs) have been net sellers, offloading shares worth ₹15,412.13 crore. However, last week saw a slight turnaround in FII activity, with purchases amounting to ₹5,819.12 crore. Siddhartha Khemka, Head of Research at Motilal Oswal, believes this momentum will continue as FIIs find value in the market.
- Stable Inflation Rates: India’s Consumer Price Index (CPI) inflation has dropped to 3.61%, falling below the RBI’s 4% target for the first time in six months. This decline, driven mainly by lower food prices, presents an opportunity for the RBI to consider further rate cuts, as highlighted by a recent Morgan Stanley report.
Looking Ahead
As the Indian stock market continues to gain traction, analysts predict that this upward trend may persist, although some profit-taking could occur as valuations become attractive. With a stable economic outlook and supportive monetary policies, investors are keenly watching for further developments in the coming weeks.
For more insights on market trends and economic forecasts, consider checking out resources like NSE India or BSE India.
