The stock market decline that began in October 2024 has finally come to a halt. Not only has the market recovered significantly, but several stocks have also skyrocketed. The rally has continued for the seventh consecutive day, boosting both the Sensex and Nifty. With this, the market has effectively compensated for the losses incurred in early 2025.
A key factor behind this surge is the renewed interest of foreign investors, who have resumed buying after months of selling. This has led to a substantial rise in banking stocks. But what exactly triggered this sudden upswing in the stock market?
1. Return of Foreign Investors
The primary reason for the market's previous five-month slump was the aggressive selling by foreign portfolio investors (FPIs). However, this selling pressure has now eased, and buying activity has picked up. On Friday alone, FPIs made a net purchase of Rs 7,470.36 crore. A key driver of this change is the revision in the FTSE index, which has strengthened investor sentiment. Additionally, lower inflation and a stronger Indian rupee have further boosted confidence in the market.
2. Strengthening of the Rupee
The Indian rupee appreciated by 37 paise against the US dollar on Monday, closing at 85.61 per dollar. This appreciation has been fueled by foreign investment inflows and a weakening dollar, contributing to improved market sentiment.
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3. Strong Global Cues
Positive global trends have also played a significant role in the stock market rally. The US stock market has shown resilience, further boosting confidence in Indian equities. Additionally, US President Donald Trump has indicated that he will take a selective approach to tariffs, mainly targeting countries with a trade surplus against the US. This has eased concerns about potential trade disruptions.
4. Surge in Banking Stocks
Banking stocks have witnessed a massive rally, significantly contributing to the overall market surge. On Monday, the Nifty Bank index jumped by 1,000 points, reaching 51,635. Shares of major banks like Kotak Mahindra Bank, Canara Bank, and Punjab National Bank surged by up to 3%. The renewed buying interest in banking stocks has further fueled the market's upward momentum.
5. Improved Investor Sentiment
Investor sentiment has improved drastically due to the recent market gains. Last week, the Sensex soared by 3,076.6 points, while the Nifty jumped by approximately 953.2 points (4.25%). This upward momentum has reassured investors, leading to further buying activity.
With the market now on a strong recovery path, investors are optimistic about sustained growth in the coming months. The combination of foreign investments, a stronger rupee, positive global trends, and a surge in banking stocks has created a bullish outlook for the Indian stock market.