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It has definitely sparked curiosity among market enthusiasts about the stock market rally. Previously, the market was in doom, experiencing a bloodbath. But this has given a major push toward a more stable economy. The broad-based surge in the Indian stock market was mainly led by banking and realty stocks. This push came after a jump of over 1,000 points in the Sensex and the Nifty gaining more than 300 points on Monday. The BSE Sensex soared by 1,078.87 points (1.4%) to settle at 77,984.38, while the NSE Nifty 50 gained 307.95 points (1.32%) to settle at 23,658.35. Other indices also joined the green party: the Nifty MidCap index was up 1.32%, and the Nifty SmallCap index added 1.17% on the National Stock Exchange (NSE). On top of that, the BSE Sensex surged 4.16%, and the Nifty50 gained 4.25% last week, marking their biggest 1-week rally in four years.
Which Sector Led The Rally?
On a broader basis, the sector that led the rally was the banking sector. Banking stocks led the charge, with the NSE PSU Banks index surging by up to 3.18%. In addition, the Nifty Realty index jumped 1.53%, and the Nifty Oil & Gas index surged nearly 1.46%.
The Key Factors Behind
Expectations of RBI Rate Cuts: The investors has been anticipating the an interest rate cuts of RBI. The anticpaion of lowering interest rates is a major driver. Lower rates typically encourage investment and boost market liquidity.
Increased FII and DII Activity: A shift in foreign institutional investor (FII) behavior from selling to buying, along with consistent domestic institutional investor (DII) purchases, is fueling the rally. FII stood at over 7,000 crore on Friday, gradually increasing today, largely on the back of the FTSE March Review. This is lifting hopes of a possible turnaround in FPIs’ sentiment towards the Indian stock market.
However, this decline has made stocks more reasonably priced. The Nifty50’s price-to-earnings (P/E) ratio is now 18.8x, down from 23.8x in September 2024. Similarly, the P/E ratios for MidCap and SmallCap stocks have dropped from 42x to 30x, and 28x to 23x, respectively. This makes Indian stocks more attractive for investors looking for better value.
Stable Indian Rupee: A stable Indian Rupee is creating more confidence for FIIs, which is helping bring in more foreign investment. The Indian Rupee jumped 12 paise to 85.85 against the US dollar on Monday, backed by strong domestic inflows, despite global uncertainties.
