Indian stock markets opened sharply higher on Thursday, with the Sensex surging nearly 1,400 points and the Nifty moving past 24,300. A steep decline in crude oil prices and a rally on Wall Street following the US midterm election results boosted global investor sentiment.
The Democrats' gains, which gave them control of both chambers of Congress, also fuelled expectations of stronger opposition to President Donald Trump's tariff policies and a possible reduction in global trade uncertainty. Hopes of easing tensions in the US-Iran conflict and renewed foreign investor buying further strengthened the positive mood on Dalal Street.
At 10:04 am, the BSE Sensex was trading at 78,820.40, up 1,519 points or 1.97%. The NSE Nifty 50 advanced 436.70 points or 1.82% to 24,397.30.
In the previous session on Wednesday, the Sensex had closed 383.55 points higher at 77,301.40, while the Nifty gained 149.75 points to settle at 23,960.60.
CRUDE OIL PRICES DECLINE
The sharp fall in international crude oil prices has emerged as one of the biggest triggers behind the market rally. Brent crude was trading at $93.59 per barrel, down 1.09%, while US West Texas Intermediate (WTI) crude declined 1.53% to $86.77.
Oil prices have weakened amid expectations that the US-Iran conflict could move towards de-escalation following the American midterm election results.
For India, which depends heavily on imported crude, lower oil prices could reduce the import bill, ease inflationary pressures and bring down operating costs for businesses. Airlines, in particular, could benefit from reduced aviation fuel expenses.
The election results have also raised hopes that the changed balance of power in Congress could restrict Trump's ability to pursue aggressive trade and tariff measures. Any reduction in policy uncertainty could improve investor confidence towards emerging markets, including India. However, the actual impact will depend on future US trade decisions and geopolitical developments.
Fresh buying by foreign investors has provided another boost to the market.
Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said foreign institutional investors (FIIs) had purchased equities worth Rs 20,834 crore in the cash market over the previous four trading sessions, with their buying activity increasing steadily.
He attributed the improvement in sentiment to falling crude prices, the resilience of the Indian economy and stronger corporate earnings.
Vijayakumar also said expectations of a possible removal of the long-term capital gains (LTCG) tax in the upcoming Union Budget had influenced foreign investors' approach towards India. However, this remains a market expectation and not an announced government decision.
BUYING SEEN ACROSS SECTORS
The market rally was broad-based, with buying interest visible across several heavyweight stocks and sectors.
IndiGo led the Sensex gainers with a rise of 5.07%. Bajaj Finance advanced 4.63%, while Asian Paints climbed 4.18%. Mahindra & Mahindra and Maruti Suzuki gained 3.84% and 3.71%, respectively.
Banking heavyweights also witnessed strong buying. HDFC Bank rose 2.57%, while ICICI Bank advanced 2.46%. Larsen & Toubro, UltraTech Cement, Infosys and several other major companies also traded in positive territory.
Among sectoral indices, Nifty Financial Services ex-Bank led the gains, rising 2.72%. Nifty Auto advanced 2.04%, while Nifty Realty gained 1.94%.
Stocks from the IT, media, metal and FMCG sectors also moved higher. Broader markets participated in the rally, with the Nifty 500 gaining 1.32%.
WILL THE MARKET RALLY CONTINUE?
Vijayakumar expects the positive trend to continue as economic conditions improve. He also anticipates further short-covering in large-cap stocks, particularly banking and financial companies.
Short-covering occurs when traders who have bet on falling share prices buy back stocks to close their positions. This additional buying can accelerate an upward movement in the market.
However, he cautioned that profit booking at higher levels could restrict further gains. Domestic institutional investors have shown a tendency to sell during market rallies, which could limit the market's upward momentum.
He also warned that prolonged political confrontation in the US could weaken the initial optimism surrounding the midterm election results.
Dr Ravi Singh, Chief Research Officer at Master Capital Services Ltd, said the US election outcome could encourage foreign investment in Indian equities if it helps reduce uncertainty surrounding global trade policies.
For now, falling crude oil prices and renewed FII buying are providing the biggest support to Indian markets. Whether the rally continues will depend on movements in oil prices, foreign investment flows, corporate earnings and developments on the geopolitical front.
