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The Sensex surged over 1,500 points on October 15, while the Nifty 50 climbed nearly 2%. Here are the five key factors driving the recovery.
Indian stock markets staged a sharp rebound on Thursday, with the BSE Sensex jumping over 1,500 points to touch an intraday high of 74,316. The NSE Nifty 50 also rallied more than 400 points, crossing the 23,000 mark as buying interest returned to Dalal Street.
The recovery followed losses in the previous session, with investors buying shares across key sectors. The rally came even as global markets remained under pressure following stronger-than-expected US inflation data.
So, what is driving the stock market higher today? Here are five key reasons behind the rally.
Crude oil prices fall
Falling crude oil prices provided a major boost to Indian equities. Brent crude futures declined $1.76, or 1.75 per cent, to $104 per barrel, while US West Texas Intermediate crude fell $1.02, or 1.07 per cent, to $94.07 per barrel on Thursday.
Oil prices eased as investors weighed potential supply disruptions following attacks on shipping in the Strait of Hormuz against US efforts to reduce petroleum transportation costs by relaxing sanctions on certain vessels.
Lower crude oil prices are generally positive for India, one of the world’s largest oil importers. A sustained decline can reduce the country’s import bill, ease inflationary pressures and lower costs for sectors that depend heavily on fuel.
Cheaper oil can also ease pressure on the rupee and improve the outlook for corporate earnings. However, geopolitical risks and possible supply disruptions remain important factors to watch.
More from BusinessRupee strengthens against the US dollar
The Indian rupee’s recent appreciation also supported market sentiment. The currency opened Thursday’s session around 94.92 against the US dollar, strengthening by approximately 0.2 per cent.
The dollar weakened after touching an 18-month high overnight, while measures announced by the Reserve Bank of India over the previous weekend to protect the rupee from volatility also remained in focus.
A stronger rupee can help Indian companies that rely on imported raw materials, particularly when their input costs are linked to the dollar. It can also reduce the domestic cost of imports, including crude oil.
However, the benefits vary across sectors. Export-orientated businesses may face pressure when the rupee strengthens because their overseas earnings translate into fewer rupees.
The sustainability of the currency’s recovery will depend on global dollar movements, capital flows and India’s external economic conditions.
IT stocks extend gains
Information technology stocks continued their upward momentum, advancing for a third consecutive trading session. Shares of Tata Consultancy Services, Infosys, HCL Technologies and Tech Mahindra were among the stocks in focus.
The gains came amid improving earnings and a selloff in stocks linked to artificial intelligence. The correction in AI-related stocks could potentially redirect some investor attention towards Indian equities.
A change in foreign investor flows could provide additional support to Indian equities, although any reversal remains uncertain.
Banking and consumer stocks attract buying
Banking and consumer stocks also contributed to Thursday’s rally, supporting the broader market recovery.
Banking stocks carry significant weight in benchmark indices, meaning gains in major lenders can lift the Sensex and Nifty. Consumer stocks, meanwhile, can benefit from improving investor sentiment and expectations around demand and earnings.
Buying across multiple sectors can make a market recovery more broad-based rather than dependent on a handful of heavyweight companies.
Investors will now watch whether the buying momentum continues in these sectors and whether gains spread to mid-cap and small-cap stocks.
Correction in global AI stocks
The rally in Indian markets came despite weak global cues. Asian equities fell on Thursday after US consumer inflation for September came in higher than expected, strengthening expectations that the Federal Reserve could take action later in the year.
MSCI’s broadest index of Asia-Pacific shares outside Japan declined 1.2 per cent, while Japan’s Nikkei 225 slipped 1.3 per cent. South Korea’s KOSPI fell sharply, reflecting pressure on technology stocks. US stock futures were also lower after Wall Street ended Wednesday’s session in the red.
AI-linked stocks came under pressure as investors assessed the inflation data and its implications for interest rates.
