The Indian stock market has picked up an invincible rally since the US Federal Reserve delivered its supersized interest rate cut by 50 basis points (bps) last week. Nifty 50 has hit new highs in every session since the rate cut boosted investors' global risk appetite, while the Sensex topped the historic 85,000 mark this week. Sustained foreign fund inflow in Indian equities and robust macro indicators contributed equally to the rally.
On Wednesday, the Nifty 50 reversed course in the final hour of trade to close 0.25 per cent higher at 26,004.15 points, with nine of the thirteen major sectoral indexes logging gains on the day. The BSE Sensex was up 0.3 per cent, settling at an all-time high of 85,169.87. Both the benchmark indexes had dropped as much as 0.2 per cent earlier in the session. During the day, it surged 333.38 points or 0.39 per cent to hit a record intra-day peak of 85,247.42.
The 30-share BSE Sensex closed above the 85,000 level for the first time on September 25, while the NSE Nifty 50 scaled the 26,000 peak at close on Wednesday as fag-end buying in banking and power shares helped stock markets recoup early losses. The spotlight has shifted to US Fed Chair Jerome Powell's comments on rate cuts and US inflation data due later this week.
Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd: "Markets were extremely range-bound for most of the trades, but winding up of short positions ahead of tomorrow's monthly expiry triggered a small rally towards the end, which saw both benchmark indices, Sensex and Nifty, closing above their psychological levels of 85,000 and 26,000 respectively.
However, broader market weakness due to profit-taking could signal that the current rally may face intermittent hurdles due to global uncertainty and rising Middle East conflict. The short-term technical outlook continues to favour bulls on a backdrop of higher/high-low patterns on all time frames, with Nifty’s immediate goal post now at 26,250 while psychological support is at the 25,750 mark.
Also Read: Nifty 50 rises over 19% in 2024, set to surpass full-year 2023 gains amid strong FPI inflows
Ajit Mishra – SVP, Research, Religare Broking Ltd: "Markets experienced a volatile session but managed to extend their upward trend, with a sharp rally in the last half hour pushing Nifty to close near the day's high at 26,004.15. The tone was subdued most of the day, while sectoral performance was mixed. Profit-taking in midcap and smallcap stocks put pressure on market breadth.
We maintain our bullish outlook amid ongoing consolidation and recommend focusing on stock selection aligned with sectoral trends. Besides rate-sensitive sectors, we observe strong momentum in metal and power stocks, while the current correction in IT presents a buying opportunity. Traders should plan their positions accordingly."
Vaibhav Porwal, co-founder, Dezerv: “The current market levels reflect market fundamentals and liquidity flows. Fundamentally, the markets should deliver 12-15% returns per annum; therefore, we expect 18-24 months for markets to reach these levels. However, a strong buying momentum in the market is fueled by strong liquidity. In such a scenario, markets can overextend. Which means that we may see the 100k number shortly.”
According to traders, investors struggle to find clear directions following a record rally. The US Federal Reserve's decision to cut rates by 50 bps signals a shift in global monetary policy, and its ripple effects are felt across global markets, including India. Analysts said the rally was fueled by optimism about India's economic growth prospects and the easing of monetary policy in the US, which is expected to attract more foreign investment.
Sectors benefiting from lowering interest costs might include real estate and infrastructure companies, which are heavily debt-funded. According to market experts, Indian NBFCs have looked outside India to fund their capital at lower interest rates and might benefit from this regime. Other indirect beneficiaries could be discretionary sectors such as automotive and FMCG companies.
A lower interest rate regime should benefit sectors involving high debt, such as real estate and infrastructure companies. Experts say reducing interest rates can ease telecom companies' debt burden, especially with ongoing 5G rollouts.
The sector may experience enhanced profitability and attract investor interest. Selective mid-cap and small-cap companies with significant debt at relatively low valuations can be considered for future value appreciation.
According to Amit Golia, Group CEO of MarketsMojo, over the past three months, the dollar index has fallen by nearly six per cent in anticipation of a rate cut by the US Fed. Indian investors need to be mindful of sectors such as IT and pharmaceuticals with higher exposure to revenues in USD, as a depreciating dollar will lead to lower sales realization in INR terms.
“Investors should try to maintain a diversified portfolio to minimize the effects of such monetary actions worldwide. Such diversification would require minimum efforts to rebalance and provide satisfactory returns over the long term. Indian market valuations are already elevated, suggesting that the potential benefits of a rate cut have been priced in. As a result, expecting substantial returns from investments in rate-sensitive stocks may no longer be a viable strategy,” said Amit Golia.
"India's growth narrative remains robust, as reflected in the markets that command some of the highest valuations globally. Retail investors should focus on selecting promising companies in the right sectors and hold their positions for the long term," added Golia of MarketsMojo.
According to Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd, investors should approach this market cautiously, as the high valuations present both opportunities and risks.
“While the one lakh mark seems within reach in Diwali 2025, it's important to remember that markets are cyclical. A sustained upward trend often leads to periods of consolidation or even correction. It's crucial to avoid overextending positions and to have a realistic outlook on potential returns,” said Gour.
Technical View: Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Intermediates Ltd:
"The volatility index, INDIA VIX, cooled by 7.37 per cent, settling at 12.41, indicating a decrease in market volatility. Technically, the index is on the verge of crossing the upper trend line resistance of the channel pattern, which is around the range of 26,000 levels.
If Nifty sustains above 26,000, it could test 26,200. On the downside, 25,800 will serve as short-term support for the index. Thus, a buy-on-dips strategy should be adopted in Nifty for the short term.
Bank Nifty oscillates within a rising channel and is placed above the breakout point of a rounding bottom pattern breakout, indicating strength. However, in the short term, the index might face a hurdle near 54,500 levels, and if it sustains above it, then it might test the levels of 55,000-55,500, where the upper trend line resistance of the channel pattern is placed.
On the downside, the breakout level near 53,350 and the psychological level of 53,000 will serve as support points. Thus, a buy-on-dips strategy should be adopted for Bank Nifty in the short term.”
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
