Sensex surges by 580 points, Nifty near 26,000; Here’s the key factors fueling the market rally

Synopsis: Markets rose sharply amid the US Inflation Eases, Foreign Investment Inflows, Corporate Performance, Sectoral Gains, and the Currency Movement

The Indian stock market has experienced a significant rise today, with both the Nifty 50 and Sensex showing a considerable rally. Investors and traders are closely watching the evolving global and domestic market conditions as they try to understand the reasons behind this Bull market.

In today’s session, both indices opened with a gap-up opening, reflecting positive sentiment from the start. As trading continued, buying pressure increased, causing a further rally in the indices. This led to a sharp rise in intraday gains for both the Sensex and Nifty, highlighting the optimistic sentiment among market participants

Index Overview  

The Nifty Index opened at 25,911.50, with a gap-up opening from its previous close of 25,815.55, and the index has stretched and rallied almost 165 points from the previous close.

The Sensex Index opened at 84,756.79, with a gap-up opening from its previous close of 84,481.81, and the index has stretched and rallied almost 580 points from the previous day’s close.

Here are the top factors for the rally

US consumer prices rose 2.7% year-on-year in November, slowing from a 3% increase in September, signaling a moderation in inflation. This has sparked hopes that the Federal Reserve might cut interest rates soon, though analysts warned the figures could be artificially low due to the recent government shutdown. Lower US rates tend to make emerging markets, like India, more attractive to foreign investors as Treasury yields and the dollar typically fall.

Asian markets followed Wall Street’s lead on Friday, with Japan’s Nikkei up 1.3%, South Korea’s KOSPI up 0.8%, and Taiwan’s TAIEX up 1.3%, boosted by strong results from chipmaker Micron. The broader MSCI Asia-Pacific index (excluding Japan) rose 0.7%, while Chinese blue chips gained 0.6%. The yen weakened after the Bank of Japan raised interest rates to a 30-year high, leaving room for further tightening.

The Indian rupee strengthened for the third consecutive day on December 19, supported possibly by the Reserve Bank of India (RBI), according to currency experts. It opened at 90.15 against the US dollar, up from 90.25 at the previous close.

Over the past three days, the rupee has gained 1.04% against the dollar, helped by corporate dollar inflows and a broadly weaker US dollar, said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP. The rise in the rupee against the US dollar may have also boosted Indian equities.

On the institutional front, foreign investors (FIIs) continued buying for a second straight day on December 18, purchasing equities worth nearly Rs. 600 crore, while domestic investors (DIIs) remained strong buyers with inflows of Rs. 2,700 crore.

Prashanth Tapse, senior VP (research) at Mehta Equities, said a lower US policy rate could encourage more foreign inflows into India, strengthen the rupee, and improve market liquidity.

Accenture reported stronger-than-expected first-quarter results, driven by AI solutions that help clients boost productivity. The IT consulting firm posted revenue of $18.74 billion, above analysts’ estimate of $18.52 billion, with new bookings rising 12% to $20.9 billion, split between consulting ($9.88 billion) and managed services ($11.06 billion). Management noted that overall and discretionary spending remained at last year’s levels.

Following this, major Indian IT stocks like Infosys, TCS, and Wipro rose by up to 1% each. The US November consumer price index showed annual inflation at 2.7%, below the expected 3.1%, raising hopes of another Federal Reserve rate cut. Softer US rates could increase discretionary spending by US tech firms, benefiting Indian IT companies.

Pharma stocks were among the top sectoral gainers, rising 1.3%, as the US defense bill, which includes the Biosecure Act, is expected to encourage global pharma companies to diversify supply chains away from China. Wockhardt Pharma, Divi’s Laboratories, and Laurus Labs led the gains. Citi analysts noted that this development could potentially benefit Indian contract development and manufacturing organisations (CDMOs).

As per the analysts, the Immediate resistance for Nifty is seen at 25,900–26,000, while key support levels are 25,700 and 25,600. As long as the index stays above 25,500, a selective buy-on-dips strategy is considered favorable, with strict adherence to stop losses.

Given ongoing volatility and global uncertainties, traders are advised to remain cautious, use prudent leverage, maintain tight trailing stop-losses, and book profits in stages. Fresh long positions should be considered only on a sustained breakout above 26,100, while continuously monitoring global cues and key technical levels.

Written by Sridhar J 

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