Indian equities started Wednesday’s session on a buoyant note, extending their winning streak on the back of positive global and domestic cues. The S&P BSE Sensex jumped more than 350 points in early deals, while the Nifty50 edged closer to the 25,000 level around 9:30 am, underscoring the improving sentiment after five consecutive sessions of gains. Although the Nifty has advanced 1.2% during this uptrend, it still trades nearly 5.4% below its record high touched on September 27, 2024, reflecting lingering caution among investors.
Analysts attributed the early surge to optimism surrounding tax relief measures, rising expectations of a US Federal Reserve rate cut, and prospects of progress in India-US trade negotiations. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the market was drawing strength from President Donald Trump’s latest outreach toward India and Prime Minister Narendra Modi’s constructive response. However, he cautioned that past experiences suggest markets should focus on Trump’s concrete actions rather than his rhetoric.
Despite the positive triggers, Vijayakumar flagged stretched valuations as the biggest hurdle for sustained upward momentum, particularly in the broader market segments. He pointed out India’s relative underperformance compared to other Asian benchmarks, with the Nifty delivering a marginal negative return of –0.69% over the past year, while Hong Kong’s Hang Seng surged 51% and South Korea’s Kospi gained 31%. He added that heavy foreign institutional selling, driven by India’s lofty valuations, had been a key factor behind this underperformance, as FIIs shifted capital to more attractive markets. He suggested that only visible signs of an earnings recovery could reverse this trend and bring foreign investors back in strength.
Geopolitical risks remained a source of unease after Trump pressed European Union officials to impose punitive 100% tariffs on China and India in a bid to squeeze Russia’s oil revenues. Yet, at the same time, Trump signaled flexibility toward New Delhi, stressing that Washington and New Delhi were working to ease trade barriers and boost bilateral commerce. Modi echoed this optimism, saying he was looking forward to holding talks with Trump and hoped the discussions could be concluded swiftly.
On the flows front, foreign portfolio investors turned net buyers on Tuesday, pumping in ₹20.5 billion ($232.5 million) according to provisional data, while domestic institutional investors extended their buying streak to the eleventh straight session, further cushioning the market.
Sectorally, IT stocks led the rally, with the Nifty IT index climbing 2.8% on Tuesday. Infosys was the star performer, surging 5% after announcing that its board would consider a share buyback on September 11, a move that further bolstered investor confidence in the sector. The strong performance in IT, coupled with sustained inflows and optimism over trade diplomacy, helped offset concerns about valuations and geopolitical uncertainty, driving benchmarks higher in early trade.
