Global Money, Domestic Rally

After months of volatility, Indian benchmark indices finally took a much-needed breather and staged a remarkable comeback. Since October 2024, this has been the most eye-catching and consistent rally, with the BSE Sensex and Nifty 50 climbing steadily over the past fortnight. Both indices registered impressive gains of 5-6 per cent in just eight trading sessions, reflecting renewed investor confidence and a shift in market sentiment. The primary catalyst behind this upward momentum has been strong foreign institutional investor (FII) inflows.

In a notable turnaround, FIIs became net buyers, pumping over ₹32,000 crore into Indian equities during the fortnight, marking the longest streak of continuous FII buying since September 2024. This renewed FII interest was largely driven by a weakening US dollar, which has improved the relative attractiveness of emerging markets, particularly India. Additionally, the Indian Rupee has shown strength, recording its best monthly appreciation in recent times, further boosting foreign investor sentiment. Adding to the optimism are ongoing U.S.-India trade negotiations, especially concerning tariff agreements. The outcome of these discussions is expected to shape market direction in the near term.

The broader indices also reflected the optimistic investor sentiment, with the BSE Mid-Cap and BSE Small-Cap indices gaining 5.4 per cent and 4.66 per cent, respectively. Additionally, all sectoral indices traded in the green territory, with real estate, information technology, automobiles, and banking emerging as the best-performing sectors. Following the Reserve Bank of India’s recent rate cut, real estate stocks saw a notable rally as lower interest rates make home loans more affordable, stimulating demand in the housing market. This positive sentiment has bolstered investor confidence in real estate companies, expecting a boost in property sales and improved financial performance.

Auto sector stocks also experienced a climb, benefiting from the potential positive effects of the rate cut. The rally in information technology stocks propelled benchmarks to nearly 4-month highs. Tech Mahindra and HCL Technologies saw their shares soar by around 15 per cent each over the fortnight, driven by better-than-expected results and optimistic forward guidance. Banking stocks surged, driving the Nifty Bank index to new record highs and catching investors by surprise as they questioned the market’s recovery. So far, banks have delivered stronger-thanexpected results, with significantly lower slippages.

Markets extended their winning streak, with the Nifty 50 crossing the crucial 24,000 level after nearly four months, driven by strong foreign institutional investor inflows

Additionally, the encouraging growth trajectory in both deposits and loans has further bolstered investor confidence in the sector’s stability and potential. The fast-moving consumer goods (FMCG) and healthcare sectors, typically viewed as defensive, experienced modest growth compared to others.

As Q4FY25 performances from India Inc. unfold, they will play a crucial role in sustaining FII interest and maintaining confidence among domestic investors. Stay tuned to Dalal Street Investment Journal for detailed sector-wise insights on Q4FY25 results.