Amidst the festive mood, benchmark indices began the Diwali week on Wall Street on a positive note. Today marks the third consecutive day of growth for both Sensex and Nifty.
After the indices rose by more than 1200 points in the previous two trading sessions, the BSE Sensex barometer added another 1030 points, representing 1.38 percent, reaching a daily high of 75,489.70 points. Simultaneously, its counterpart on the NSE, Nifty 50, rose by 278 points or 1.20 percent, reaching the mark of 23,330.70 on Monday.
Broader markets also joined this rise on Wall Street, as Nifty Midcap 100 and Nifty Smallcap 100 increased by 0.85–0.95 percent.
By sector, with the exception of Nifty Pharma, all sectoral indices demonstrated positive momentum. Nifty Metal showed the largest gain with a rise of 1.5 percent, while FMCG, PSU bank, and realty each increased by more than 1 percent.
V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, noted that there are clear signs of a turnaround in the Indian market, supported by both external and internal positive signals. He added that the slight decrease in Brent crude oil prices from last week's high of $118 to $110 was a relief. Equally important is the drop in US 10-year bond yields to 4.93 percent. However, perhaps more significant than these external supporting factors is the sharp weakening of the AI trend, which caused Nasdaq to fall by 2.8 percent last Friday. This weakening AI trend benefits India, which is considered an AI counterweight.
What is driving the markets?
There are six key factors behind the stock market's rise:
1. Significant contribution from Reliance Industries
The substantial increase in Reliance Industries by almost 7 percent after publishing second-quarter results that exceeded expectations significantly influenced the rise in benchmark indices. RIL alone contributed 25 percent to the overall BSE Sensex rise of 1000 points today, with the company rising by 400 points. Analysts remain optimistic about this stock and have maintained their 'BUY' ratings, as strong performance in the O2C segment improved revenue forecasts.
2. Decline in oil prices
Oil prices dropped sharply compared to the levels recorded on Friday, improving sentiment towards India, which is the world's third-largest crude oil importer. Peace talks in the war between the US and Iran put pressure on oil prices, with Brent futures falling another 3 percent below $110 per barrel. October oil futures closed at a six-month high.
3. Bets on AI slowdown
India is often positioned as an anti-AI trend, and the decline in euphoria surrounding tech stocks now acts as an additional driver for Indian equities, drawing attention to traditional IT services stocks. After achieving a six-year high in October, when the index heavyweight rose by 18.42 percent, IT sector stocks rose by 2 percent in today's trading session. Overall, the IT index traded higher by 0.8 percent.
4. Visible inflow from FPI
After several weeks of steady selling, foreign portfolio investors (FPI) are showing cautious signs of shifting to buying in Indian stocks. Last week, FPI purchased shares worth 6,300 crore rupees in the money market, although experts believe it is too early to interpret this as a trend reversal.
5. Strength of earnings
Earnings for the current September quarter remain healthy despite price pressures. Jefferies noted in a recent report that the rating upgrade ratio remains above 50 percent for the current quarter. Of the 105 companies analyzed by the global investment bank in its coverage, 56 percent reported results exceeding expectations. Jefferies also noted that our MSCI India earnings estimates for fiscal year 27 were raised by one percentage point to 15 percent as of now during the reporting season, although some major players have not yet published their data.
6. Technical outlook
Shrikant Chouhan, Head of Equity Research at Kotak Neo, stated that the short-term market structure remains positive on technical charts. He reported that the indices formed a long bullish candle on weekly charts, and the formation of a bottom up on daily charts supports a positive short-term forecast. Nevertheless, he noted that the ideal strategy at the current level would be to buy on dips and book profits on rallies. For Nifty, key support levels will be 22,800 and the 20-day moving average around 22,600. Similarly, critical support zones for Sensex are 74,000 and 73,400. Chouhan concluded that as long as the indices trade above these levels, the uptrend is likely to continue.