Why is the Indian stock market soaring from Nifty 50 to Sensex? outlined with five important justifications
Stock market news: Last week, the Indian stock market saw notable gains, with the BSE Sensex up 4.16% and the Nifty 50 up 4.25%.
News from the Indian stock market: The Nifty 50 and the BSE Sensex recorded their largest weekly gains in the last four years as a result of the Indian stock market closing higher in all trading sessions last week. The Nifty 50 index gained 953 points, or 4.25%, per week, rising from 22,397 to 23,350 levels. The BSE Sensex jumped by over 3,000 points per week, or 4.16%, from 73,828 to 76,905 levels. Due to previous week’s robust buying in the wider market, this stock market rally was participatory.
The BSE Small-cap index saw a weekly increase of 3,452 points, or 7.90%, rising from 43,844 to 47,296 levels. The BSE Mid-cap index saw a weekly increase of 2,769 points, or around 7.10%, as it soared from 39,062 to 41,831.Thus,it’s evident that broad markets performed better than the leading indices.
What is causing the Indian stock market to soar?
Experts in the stock market claim that a number of factors contributed to the recent surge in the Indian stock market.Nonetheless,they identified the following five factors as the main drivers of last week’s prolonged rally on Dalal Street: Buzz about the RBI rate drop,improved Q4FY25 earnings,a stable Indian currency,DIIs responding appropriately to FIIs, and a stable outlook for Indian inflation.They stated that as the majority of Indian equities are trading at attractive prices,the upswing on Dalal Street might continue the following week with some profit-booking triggers.
Also Read : The Sensex rises more than 600 points. Examine the main causes of the stock market’s rise.
The top five factors driving the Indian stock market’s surge :
1] RBI rate reduction buzz: “The market anticipates a rate cut by the Reserve Bank of India (RBI) at the next RBI policy meeting next month, following the US Fed’s recommendation to decrease US Fed rates twice in CY25. Dalal Street investors are discounting on the potential RBI rate cut,which would guarantee greater market liquidity, by making aggressive purchases,according to Avinash Gorakshkar,Head of Research at Profitmart Securities.
India’s consumer price index (CPI) inflation is predicted to average 4% in FY26,according to a Morgan Stanley report released Tuesday last week. This would allow the Reserve Bank of India (RBI) to reduce interest rates by a total of 75 basis points (bps), which is an increase from the initial estimate of a 50 bps easing cycle.
2] Improved Q4FY25 earnings: According to Gorakshkar, the economy is showing indications of recovery as Fitch Ratings anticipates a rise in capital spending in the upcoming fiscal years, FY26 and FY27. According to him, India’s real GDP growth fell to 5.4% during the July–September 2024 quarter before increasing to 6.2% during the October–December 2024 quarter. As a result, the industry anticipates improved Q4 performance in 2025.
3] Stable Indian rupee: Dilip Parmar, Senior Research Analyst at HDFC Securities, pointed to the stable Indian National Rupee (INR), saying, “For the first time since January, the Indian rupee has strengthened past the 86 mark against the US dollar, driven by a surge in foreign investments in the domestic capital and debt markets.” Stronger-than-expected trade figures and an increase in foreign exchange reserves after the Reserve Bank of India’s (RBI) USD/INR swap intervention also contributed to the rupee’s gain.
All of these elements have contributed to the local currency’s strength. According to the HDFC Securities analyst, the rupee is now the best-performing Asian currency this month, demonstrating that the RBI’s efforts have been successful.
4] DIIs responding appropriately to FIIs: With the exception of a few sessions in March 2025, DIIs are persistently purchasing in the cash segment. By the close of last Friday’s session, FIIs were net sellers, having sold Indian shares worth ₹15,412.13 crore, while DIIs had purchased shares in the cash segment for ₹30,788.19 crore. But last week,FIIs also began purchasing, purchasing shares listed on Dalal Street for ₹5,819.12 crore in cash.
Siddhartha Khemka,Head of Research — Wealth Management at Motilal Oswal,stated,”We anticipate this upward momentum to continue on the back of the foreign institutional investors’return to the Indian market amid attractive valuations and signs of economic recovery.”
5] Stable Indian inflation: For the first time in six months, India’s CPI inflation dropped below the RBI’s 4% target, falling to 3.61% in February 2025. According to the Morgan Stanley research released last Thursday, more rate cuts are now possible because of decreased trailing inflation, which is mostly the result of declining food costs. In contrast to its previous prediction of 4.3%, the international brokerage firm now projects India’s CPI inflation to average 4% in FY26.
The Morgan Stanley research has revised its previous forecast of CPI inflation to an average of 4% for the January to March 2025 quarter, from its previous estimate of 4.5%. The firm went on to say that the current trend offers plenty of leeway for more easing because the RBI targets headline CPI within a 2-6% range.
Disclaimer:
This analysis does not represent the opinions of Mint; rather, it represents the opinions of individual analysts or broking firms. Because market conditions can change quickly and individual circumstances can differ, we highly advise investors to seek advice from certified specialists, think about their own risk tolerance, and do extensive study before making investment decisions.