In recent days, the Indian stock market has experienced significant upward momentum, marked by continuous buying activity for three consecutive sessions. On November 12, the benchmark Sensex soared by 600 points, ultimately closing at 84,466.51, a gain of 595 points or 0.71%. Similarly, the Nifty 50 index also observed a substantial increase, nearing 25,875.80, up by 180.85 points, which represents a rise of 0.70%. The BSE Midcap and Smallcap indices joined the rally, rising by 0.44% and 0.76% respectively. The rise in market capitalization was notable, with investors gaining approximately ₹5 lakh crore as the total market cap of BSE-listed companies climbed to ₹473.6 lakh crore.
This rally can be attributed to several factors fueling optimism among investors:
1. **India-US Trade Deal Prospects**: Speculation around an impending trade deal between India and the United States has emerged, igniting positive sentiment. Reportedly, US President Trump has indicated significant reductions in tariffs imposed on Indian goods, which have long limited market growth and created uncertainty. A decrease in these tariffs, expected to drop from 50% to 15-16%, could considerably benefit various sectors such as textiles and jewellery, likely boosting market confidence.
2. **End of US Government Shutdown**: Another contributing factor is the anticipation of a conclusion to the record-length US government shutdown. Recent Senate actions suggest the government may reopen soon, which would release critical economic data. This clarity could heavily influence perceptions of the US economy and might support expectations for a potential rate cut by the US Federal Reserve in December.
3. **Bihar Election Exit Polls**: The recently conducted Bihar Assembly Elections have yielded exit poll results indicating that the ruling National Democratic Alliance (NDA) may retain power. Though the impact may be limited in duration, sentiment in the market could be affected based on the official outcomes. A decisive NDA victory may uplift market sentiment, while a disappointing performance may introduce short-term pressures.
4. **Positive Macroeconomic Indicators**: India's robust growth-inflation dynamics continue to provide a solid backing for the market. Despite some external challenges, including capital outflows, India's economic indicators have remained resilient, encouraging firms like Goldman Sachs to upgrade their outlook on the Indian stock market from neutral to 'overweight.' The strengthening of corporate earnings amidst favorable policies is seen as vital for sustained growth.
5. **Stable Second Quarter Earnings**: With the second quarter earnings season nearing completion, corporate performance has largely met expectations, lacking any significant negative surprises. Analysts anticipate further improvements in earnings from the third quarter onwards, which is contributing to the bullish sentiment currently observed in the market.
The combination of these factors creates a promising environment for the Indian stock market, indicating that it may have navigated past its recent challenges. While caution is advised due to potential volatility, many analysts see a path toward stability and growth for investors in the coming months.