Benchmark stock market indices gained in early trade on Wednesday, extending the positive run for the second consecutive day. The S&P BSE Sensex was up 416.44 points to 76,317.85 at 10:27 am, while the NSE Nifty50 gained 128.10 points to trade at 22,957.25.
All the other broader market indices also witnessed strong gains in early trade despite a decent increase in volatility. IT stocks gained during the session, providing a big boost to the benchmark indices. Banking, financial services, pharma and auto stocks also gained during the session.
Here are three things to know about today’s stock market rally:
US FED DECISION HOPES, RECOVERY IN US TECH STOCKS
The US Federal Reserve’s policy stance remains an important factor for global markets, including India.
While no rate cuts are expected, the recent pause in the dollar rally and US bond yields has provided some relief.
According to experts, this is sentimentally positive for domestic equities, especially after foreign investors pulled out Rs 79,016 crore so far this month.
Another positive factor is a recovery in US tech stocks after yesterday’s bloodbath. This has provided a boost to domestic IT stocks.
POSSIBILITY OF CONSUMPTION BOOST IN BUDGET 2025
Investors are keeping a close watch on the upcoming Union Budget as sources have indicated that the government will provide tax relief and growth-focused measures to boost consumption.
While expectations remain tempered, any positive announcements could drive further market momentum.
Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said, “The focus is now on the Federal Reserve’s rate decision and the upcoming Union Budget 2025, where measures to boost consumption and growth are expected.”
DALAL STREET REMAIN CAUTIOUS
Despite the uptrend in frontline indices, broader market sentiment remains mixed. The Nifty Midcap and Smallcap indices have dropped 9.1% and 14.7% in January, respectively, signaling valuation corrections.
Analysts see this as a healthy trend, with private financials offering a favorable risk-reward balance.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “YTD Nifty is down 3.3% while Nifty Midcap is down 9.1% and Nifty Small cap is down 14.71%. The takeaway from this important data is that valuations are reverting to mean.”
“This trend will make the market healthy and is likely to continue. Correction in the overvalued broader market is desirable,” he added.
He explained that the recovery in the market witnessed yesterday “can continue with resilience in fairly priced financials”.
“However, a sharp rally is unlikely since FIIs will sell at higher levels. The market will be looking forward to positive cues in the Budget. The Fed decision today is unlikely to influence the market since no change in policy is expected from this meeting,” he said.
