Sensex, Nifty shrug off 5-day losses, extend winning streak to 8 weeks

The Nifty rose 1.7 per cent, or 429 points, to close at 24,835, a new record

Following five consecutive sessions of losses, the Indian benchmark indices staged a robust rally on Friday, bolstered by a reversal in foreign outflows and a softening in the global sell-off. The market experienced broad-based buying, leading to a significant increase in the combined market capitalisation of BSE-listed firms which surged by Rs 7 trillion to reach Rs 457 trillion.

Market participants said this sharp rally could be seen as a signal that investors have moved beyond the initial disappointment from recent hikes in capital market taxes. Instead, they are focusing on optimistic macroeconomic factors, such as an improved growth outlook and the potential for early interest rate cuts by central banks.

 

The Nifty 50 index rose 1.7 per cent, or 429 points, to close at a record high of 24,835. The Sensex ended at 81,333, marking an increase of 1,293 points, or 1.6 per cent. This performance represented the best single-day advance for both indices since June 7, and also helped them recover previous losses, allowing them to secure their eighth consecutive weekly gain — the longest winning streak for the Sensex since January 2021, and for the Nifty 50 since January 2018.

Over the week, the Sensex advanced by 0.9 per cent, while the Nifty rose by 1.2 per cent.

Both domestic and foreign portfolio investors (FPIs) turned net buyers on Friday, with net purchases amounting to Rs 2,744 crore and Rs 2,546 crore, respectively. This buying activity contrasts with the past three trading sessions, during which FPIs had withdrawn nearly Rs 7,500 crore ($900 million) in response to increases in both short-term and long-term capital gains taxes (STCG and LTCG).

Hopes for the acceleration of the US economy and moderating inflation have sparked optimism that the US Federal Reserve might begin cutting interest rates by September. This sentiment has contributed to easing this week’s global market sell-offs.

“With macro uncertainties largely dissipating, both domestic and foreign investors have fewer reasons to worry about the Indian market. Moving forward, the US elections and the trajectory of rate cuts will determine market direction. If the Fed implements more than one rate cut, it will become a catalyst,” said Saurabh Mukherjea, founder of Marcellus Investment Managers.

The information technology sector saw a surge, supported by data indicating better prospects for the US economy. The Nifty IT index climbed 2.3 per cent, with Infosys rising 2.9 per cent as the biggest contributor to the Sensex gains. In contrast, the banking sector underperformed, with the Bank Nifty index gaining only 0.8 per cent.

“Perhaps this is just sectoral rotation away from banks due to the RBI circular. Today’s gains are driven by liquidity, as there is a significant amount of money on the sidelines. Many investors have been waiting for a correction,” said Andrew Holland, CEO of Avendus Capital Alternate Strategies.

Bharti Airtel and Reliance Industries were the other big contributors to Sensex gains.

India’s Volatility Index (VIX) declined by 3 per cent, settling at 12.2 per cent. Indian equities had been declining over the past five sessions due to disruptions caused by changes in the securities transaction tax (STT), LTCG, STCG, and buybacks.

In the near term, the market trajectory will likely be determined by the remainder of corporate earnings reports and whether the inflows from domestic and foreign investors continue. “Apart from liquidity, it’s uncertain what else might drive gains. Earnings are not performing particularly well, with more downgrades than upgrades. We are in overbought territory, and the market might stabilise for a while with liquidity. Mutual funds have substantial cash reserves, and investors will likely continue to deploy them,” said Holland.

Market breadth remained strong, with 2,595 stocks advancing and 1,354 declining.