Sensex, Nifty Rebound After 6-Day Losing Streak: Key Factors Driving Market Recovery
Sensex : Indian stock markets bounced back strongly on Thursday after a steep six-day losing streak that wiped out nearly 3% from benchmark indices. The BSE Sensex surged 450 points (0.6%) to 76,621, while the NSE Nifty jumped 139 points to 23,185 in early trade, signaling renewed investor confidence.
This recovery follows a period of sharp volatility, where both indices faced selling pressure but managed to limit losses in the latter half of Wednesday’s session. With global market sentiment improving and domestic macroeconomic indicators showing resilience, investors found reasons to return to equities.
Key Drivers Behind Today’s Market Rally
1. Global Optimism on Russia-Ukraine Peace Talks
Investor sentiment turned positive after reports of potential US-Russia peace talks surfaced. US President Donald Trump and Russian President Vladimir Putin reportedly agreed to initiate negotiations, fueling hopes of de-escalation in the Ukraine war.
This optimism triggered a rally in global markets:
- S&P 500 futures rose 0.2%, while Nasdaq futures gained 0.4%.
- European stocks climbed 1%, signaling a risk-on sentiment.
- Asian markets mirrored the optimism, with Japan’s Nikkei gaining 1.1% and Hong Kong’s Hang Seng up 1%, reaching a fresh four-month high.
With geopolitical risks easing, investors shifted focus from uncertainties to recovery, pushing global equities higher.
2. US Inflation Shock Absorbed, Fed Rate Expectations Steady
Despite US inflation exceeding expectations, markets absorbed the shock well. The US consumer price index (CPI) rose 0.5% in January, with annual inflation hitting 3.0%, slightly above the forecast of 2.9%.
While US Treasury yields spiked to 4.66%, markets remained stable as expectations of prolonged Federal Reserve rate pauses were already priced in. Analysts believe the Fed is unlikely to hike rates further, which provided relief to equity investors globally.
3. India’s CPI Inflation Declines, Strengthening Rate Cut Hopes
A significant boost to domestic equities came from India’s retail inflation dropping to a five-month low of 4.31% in January, lower than the expected 4.6% and far below December’s 5.22%.
Key takeaways from the inflation data:
- Food price inflation softened, helping in overall inflation moderation.
- Economists now expect the RBI to cut rates as early as April 2025.
- Softer inflation provides more confidence to policymakers, with potential economic stimulus on the horizon.
Sakshi Gupta, Principal Economist at HDFC Bank, said, “With inflation likely to remain in the 4-4.5% range for the next two months, the RBI has room to ease monetary policy in its April review.”
4. Crude Oil Price Drop: A Boon for India
Global crude oil prices continued to decline, further easing inflationary concerns for India, a major oil-importing nation.
- Brent crude fell to $74.66 per barrel, down over 2% overnight.
- US crude dropped to $70.88 per barrel.
The decline is linked to easing geopolitical tensions and expectations of smoother supply flows. Lower oil prices help reduce inflation risks, improve corporate margins, and ease fiscal pressures, making Indian equities more attractive.
5. Chinese Market Stability Boosts Asian Sentiment
Investor confidence in Chinese markets improved, leading to stability in blue-chip stocks and a 1% rise in Hong Kong’s Hang Seng Index. This has provided support to broader Asian equities, including Indian stocks, as investors gain confidence in regional markets.
6. Value Buying in Large-Cap Stocks
After a 3% correction over six sessions, institutional investors and mutual funds found buying opportunities in undervalued large-cap stocks. Market experts suggest that:
- Investors are shifting from overvalued mid- and small-cap stocks to fundamentally strong large-caps.
- Mutual fund inflows remain strong, adding stability to the market.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “The recent correction provides an opportunity to invest in fairly valued large-caps while avoiding overheated small- and mid-cap stocks.”
Market Performance Overview (Key Financial Ratios)
| Index/Factor | Value |
|---|---|
| Sensex (BSE) | 76,621 (+450 points) |
| Nifty (NSE) | 23,185 (+139 points) |
| India CPI Inflation | 4.31% (Lowest in 5 months) |
| Brent Crude Price | $74.66 per barrel |
| US Treasury Yield (10Y) | 4.615% |
| S&P 500 Futures | +0.2% |
| Hang Seng Index | +1% (Fresh 4-month high) |
Conclusion: Will the Market Recovery Sustain?
Today’s rebound has provided relief to investors after six days of losses. However, sustained recovery will depend on global market cues, corporate earnings, and the RBI’s stance on rate cuts.
With easing inflation, lower oil prices, and global optimism, Indian equities could see further upside if macroeconomic conditions remain supportive. Investors are advised to stay cautious but take advantage of value-buying opportunities in the current market environment.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.