Sensex and Nifty 50: A Quick Overview
On Monday, December 23, 2024, the Sensex opened at 78,488.64, slightly higher than its previous close of 78,041.59, and surged as much as 877 points, reaching 78,918.12 during the morning session. Similarly, the Nifty 50 opened at 23,738.20 and quickly climbed nearly 300 points to hit an intraday high of 23,869.55. However, by mid-afternoon, the indices had pared their gains slightly. By 12:50 PM, the Sensex stood at 78,366, up 324 points (0.42%), and the Nifty 50 was 0.50% higher at 23,706.60.
Interestingly, the overall market capitalization of BSE-listed firms rose to ₹444 lakh crore from ₹441 lakh crore in the previous session. This increase in market cap added over ₹3 lakh crore to investors’ portfolios in just one day. Now,
let’s dive into the five key factors that are fueling the rise in the Indian stock market today.
1. Value Buying: Picking Undervalued Gems
After a significant market correction, investors are starting to pick up undervalued large-cap stocks. When the market falls sharply, experienced investors often seek stocks that are trading below their intrinsic value. These stocks have strong fundamentals, such as robust growth potential, low debt, consistent cash flow, and solid earnings,
yet they are available at a discount.
For example, investors are looking at blue-chip stocks that may have seen price declines but continue to show promising long-term growth prospects. This “value buying” strategy is fueling the rally in major stocks, which, in turn, helps lift the overall market.
2. Positive Global Cues: US and Asia Driving Sentiment
Global markets have played a significant role in boosting Indian stock market sentiment. Wall Street, in particular, has posted strong gains recently, which has spilled over into other major Asian markets.
The positive momentum in these regions can largely be attributed to softer inflation numbers coming out of the United States.
In a report by Reuters, the US Commerce Department revealed that prices in November rose at a moderate pace, and underlying inflation saw its smallest increase in six months. Additionally,
investors were relieved after the US Congress passed legislation to avoid a government shutdown, providing stability ahead of the Christmas holiday season.
These global developments have given Indian investors more confidence and contributed to the positive sentiment.
3. Smart Gains in Heavyweight Stocks: The Big Players Shine
The rally in the Indian stock market has been largely driven by gains in heavyweight stocks, especially in the sectors that dominate the Sensex and Nifty indices. Stocks like ITC, HDFC Bank,
and Reliance Industries saw strong price gains, with some of them rising by 1-2%.
The Nifty Bank index also experienced notable upward movement, with all its constituents showing strong gains. Given the significant weightage that banking stocks carry in both the Sensex and Nifty 50,
their performance is vital in influencing overall market trends.
These heavyweight stocks have thus played a crucial role in lifting the indices and driving the market higher.
4. Hopes of Policy Support: A Boost from the Government?
Market participants are increasingly optimistic about potential policy support from both the Reserve Bank of India (RBI) and the Indian government.
There is growing hope that the RBI will provide some monetary stimulus in the form of interest rate cuts, especially after the US Federal Reserve’s revised outlook for rate cuts.
Additionally, there is anticipation that the Indian government will accelerate its capital expenditure.
Experts also expect that the upcoming Union Budget 2025 could bring in some favorable measures that could further boost market sentiment. Many believe that these factors could lead to a 25 basis point rate cut by the Monetary Policy Committee (MPC) of the RBI.
Such policy actions, alongside fiscal support,
are helping to drive the positive sentiment in the market.
5. Technical Factors: Nifty Pullback Above Key Levels
From a technical analysis perspective, the market is showing signs of a pullback. According to Anand James, Chief Market Strategist at Geojit Financial Services,
the Nifty 50 was expected to attempt a rebound above the 200-day Simple Moving Average (SMA) at the 23,837 level.
James predicts that if the relief rally gains strength, the Nifty 50 could reach 24,165. However, if it fails to sustain above the 23,700 mark, it might signal weakness. Despite this, the possibility of a major downside move is low,
and the market is likely to maintain stability in the short term.
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Conclusion
In conclusion, the Indian stock market’s recent recovery is being driven by a combination of factors, including value buying, positive global cues, gains in heavyweight stocks, hopes of policy support, and technical pullbacks. While the market may face some challenges in the near future, the overall outlook remains positive,
supported by a strong domestic economy and favorable global conditions.
Investors seem to be looking past the recent volatility, buying up undervalued stocks, and positioning themselves for long-term growth. As always, market sentiment can be unpredictable, but for now,
the Indian stock market is showing signs of strength, and it will be interesting to see how it performs in the coming weeks.
