Sensex Up Over 1100 Points, Nifty at 23,076.05 Why is the Indian stock market rising ? -- Details Here

After consecutive sessions of losses, the Indian stock market made a strong recovery on Tuesday, January 28, with the Sensex climbing 1.48 per cent or 1117.51 points to reach 76,480.68 and the Nifty 50 gaining 1.1 per cent, at 23,076.05. The rally was primarily driven by banking and financial heavyweights, with investors showing renewed interest amid pre-Budget anticipation and fair market valuations.

Despite the broad-based market recovery, mid-cap stocks gained modestly by 0.5 per cent, while small-cap indices lagged, registering over 1 per cent losses.

Key Factors Driving the Market Surge

1. Gains in Banking and Financial Stocks

Banking and financial stocks provided the market with much-needed momentum, benefitting from the Reserve Bank of India’s (RBI) announcement of measures to infuse ₹1.5 trillion into the financial system.

The RBI plans to purchase ₹60,000 crore worth of government securities through open market operations (OMOs) in three tranches, with auctions scheduled for 30 January, 13 February, and 20 February.

Key banking stocks, including Shriram Finance, Axis Bank, Bajaj Finance, and HDFC Bank, rose between 2-5 per cent, contributing significantly to the recovery. Sectoral indices, Nifty Bank and Nifty Financial Services, jumped over 2 per cent during the session.

2. Oversold Market Rebound

The market had shown signs of exhaustion after two days of corrections, prompting a rebound. Anil Rego, Founder of Right Horizons, highlighted the market’s resilience:

"The markets have demonstrated resilience, supported by robust investor participation and improving fundamentals. Valuations are not at extremes and continue to be supported by healthy corporate earnings, strong ROEs, and low FII holdings."

3. Fair Valuation of Large-Caps

The correction in large-cap stocks brought market valuations closer to long-term averages, triggering selective buying. According to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services:

"After the correction, the market is trading at fair valuations aligning with long-term averages. Investors can utilise this opportunity to buy fundamentally strong, high-quality stocks. The outperformance of large-caps over mid- and small-caps is a healthy trend."

4. Pre-Budget Rally

Investors are optimistic about the upcoming Union Budget 2025, with Finance Minister Nirmala Sitharaman set to present it on February 1. Expectations include pro-growth measures, fiscal prudence, and incentives to boost private investment.

Narinder Wadhwa, MD & CEO of SKI Capital, expressed hope for favourable policies:

"The Union Budget will focus on demand revival, economic expansion, and bolstering investor confidence. Measures like PLI incentives and public-private partnerships could stabilise stock market sentiment, provided the fiscal deficit is managed effectively."

5. Technical Indicators Suggest a Rebound

Market analysts highlighted key technical factors driving the recovery. Shrikant Chouhan, head of equity research at Kotak Securities, pointed out in a Mint report that Nifty’s support levels at 22,750 would likely hold:

"If the Nifty 50 falls below 22,750, selling pressure may intensify. However, if the index drops to 22,600, it could present a buying opportunity for select stocks with a medium to long-term view."

As the Budget 2025 approaches, investor sentiment remains cautiously optimistic. Sectors such as banking, infrastructure, and renewable energy are expected to benefit from government initiatives aimed at boosting economic growth.

With key indices recovering and valuations appearing fair, the focus remains on global market cues, inflationary trends, and the RBI's monetary policy. Analysts recommend a balanced approach, with an emphasis on quality stocks that align with India’s long-term growth story.

The recovery in Sensex and Nifty reflects the Indian market’s underlying resilience, reinforcing the confidence of domestic and foreign investors alike as the country moves towards a new fiscal chapter.

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