Volatility has made its way back to Dalal Street, but in a surprising twist, the market is showing resilience. Despite sharp swings in early trade, both the Sensex and Nifty managed to hold their ground, suggesting that the markets are becoming increasingly adaptable to fluctuations.
By mid-morning, the Sensex was up around 100 points, hovering above 80,302, while the Nifty50 maintained its position above 24,300. This stability marks a significant shift from just a few weeks ago when even a hint of negative news could send stock prices tumbling. For retail investors, this is an encouraging sign, indicating that the market is regaining a level of steadiness. Bad days on the market may no longer be as punishing, and there are emerging opportunities for smart investing.
A major factor behind this newfound market stability is the return of foreign institutional investors (FPI). Over the past nine trading sessions, FPIs have injected more than $4.1 billion into Indian equities. This marks the longest buying streak for the market since July 2023, signaling renewed investor confidence.
There are several tailwinds propelling this rally. India's relative insulation from potential global trade conflicts, attractive large-cap valuations, and optimism about a potential U.S.-India trade deal have all tilted global money managers in favor of investing in India. Additionally, markets swiftly brushed off concerns over the rising India-Pakistan tensions following a militant attack in Kashmir, choosing instead to bet on India's economic resilience and diplomatic maturity.
In a timely boost, U.S. Treasury Secretary Scott Bessent added to the optimism by hinting that India could be one of the first countries to strike a new trade deal with the U.S., potentially as early as this week. This has added fuel to the ongoing rally in Indian equities.
Strong earnings from major companies like Reliance Industries and tactical fund flows shifting from China to India have also contributed to the momentum. As pointed out by Wealthmills Securities’ Kranthi Bathini, these factors have strengthened investor confidence and helped propel the market upwards.
However, seasoned market experts are urging caution despite the positive momentum. Dr. VK Vijayakumar, the Chief Investment Strategist at Geojit Financial Services, highlighted the need for prudence. He made an apt reference to the Sensex's record rally yesterday, describing it as a “Vaibhav Suryavanshi” moment (after the 14-year-old Rajasthan Royals player who scored a record century), noting the sharp rise of 1,005 points despite heightened border tensions.
Vijayakumar acknowledged that while the markets have priced in a restrained response from India, without escalation into a full-blown conflict, geopolitical uncertainty still looms large. He emphasized the positive factors driving the rally, such as sustained FII buying, India's economic strength, and favorable trade deal signals. However, he advised investors to tread cautiously in the short term due to the unpredictable geopolitical backdrop.
While volatility is still part of the story, for now, it is volatility with a silver lining. The market seems to be learning how to cope with fluctuations, and investors are finding ways to navigate this choppy but promising terrain. The future might still have its share of ups and downs, but for now, the focus remains on India's resilience and the potential rewards for those willing to take a calculated risk.
