Silver Linings Once Again!

The past fortnight brought a wave of optimism for investors, as Indian markets staged a strong recovery, recouping a significant portion of the steep losses incurred during the 10 per cent correction from their record highs. Foreign institutional investors (FIIs) unexpectedly turned net buyers during the period, pumping `6,907 crore into equities. Simultaneously, domestic institutional investors (DIIs) maintained their unwavering market confidence, channelling `8,717 crore in fresh investments.

The market rally was initially fuelled by the optimism stemming from the Maharashtra election results, where the BJP-led NDA secured a decisive victory. This outcome is expected to bring political stability to the state, bolstering investor confidence through the continuity of pro-business policies, especially after the uncertainties caused by prior coalition shifts. During the period, benchmark indices BSE Sensex and Nifty 50 rallied by 3.28 per cent and 3.22 per cent, respectively.

Broader indices mirrored this recovery, turning investors’ portfolios back into the green territory. The BSE Small-Cap index stood out as the top performer, delivering an impressive gain of 8.43 per cent, while the BSE Mid-Cap index also posted solid returns of around 6 per cent, reflecting widespread market optimism. After a prolonged period of subdued performance, all sectoral indices posted gains, led by strong recoveries in real estate, oil and gas, and metal sectors— sectors that had recently borne the brunt of market downturns.

The optimism in these sectors was also driven by a clear political mandate, enabling the government to advance key infrastructure projects—a cornerstone of the BJP’s agenda—thereby providing a significant boost to sectors such as construction, real estate, and allied industries. Meanwhile, defensive sectors such as healthcare and FMCG recorded modest gains, reflecting their traditionally stable but less dynamic response during periods of market rebound.

In other developments, the Reserve Bank of India (RBI) recently revised its inflation forecast for the current fiscal year to 4.8 per cent, acknowledging ongoing challenges faced by consumers due to persistently high food prices. As a result, the RBI chose to maintain the repo rate at 6.5 per cent, a move that was widely anticipated by experts and demonstrates a prudent, balanced strategy aimed at supporting economic growth while keeping inflation in check

Additionally, the RBI’s decision to lower the Cash Reserve Ratio (CRR) by 50 basis points is expected to be a positive step. This change will infuse significant liquidity into the banking system, thereby boosting banks’ lending capabilities and improving credit availability for individuals and businesses. Will the market maintain its upward trajectory, or is a downturn on the horizon? Stay tuned for further updates.