Indian equities bucked a sharp sell-off across Asian markets on Thursday, with the Sensex soaring over 1,500 points and the Nifty closing within striking distance of the 23,000 mark. Hopes of an early India-US trade deal, easing crude oil prices and a stronger rupee lifted investor sentiment, making Indian benchmarks the best performers in Asia.
However, while heavyweight stocks powered the benchmarks higher, the broader market remained under pressure, with more stocks declining than advancing. Foreign portfolio investors (FPIs) also continued to pull money out of Indian equities.
The Sensex surged 1,533.72 points, or 2.11%, to close at 74,315.61, while the Nifty climbed 374.65 points, or 1.66%, to settle at 22,997.35, just shy of the psychologically important 23,000 level. Both indices posted their biggest single-day gains in four months.
Foreign investors, however, continued to sell. FPIs sold shares worth Rs 5,285.37 crore on Thursday, taking their cumulative October outflows to Rs 44,008 crore, or about $4.6 billion — the highest in five months. Domestic institutional investors (DIIs) continued to provide support, purchasing shares worth Rs 3,319.39 crore during the session.
The sharp rebound came amid renewed optimism over a breakthrough in trade negotiations between India and the US. US Ambassador to India Sergio Gor said on Thursday that the two countries were close to finalising a trade agreement, with most major issues resolved, according to Bloomberg.
The optimism helped Indian equities stand out in an otherwise weak session for Asian markets. South Korean stocks plunged 7.57%, while Japanese and Taiwanese benchmarks tumbled 4.90% and 3.41%, respectively.
AI-related stocks across the US and these regional markets witnessed heavy selling amid concerns over another US Federal Reserve rate hike in October, following an increase in US inflation to 3.7% in September.
The unwinding of the AI trade in global markets appeared to work in favour of Indian software companies, which looked relatively attractive to investors. The Nifty IT index gained 8.4% over three consecutive sessions, including a 1.82% rise on Thursday. The combined market capitalisation of leading IT companies swelled by Rs 1.97 lakh crore during this period.
HCL Technologies, TCS and Infosys were among the major beneficiaries of the renewed buying interest. Private banks, automobiles and financial services stocks also contributed to the rally.
Reliance Industries emerged as another major driver, jumping 4.03% to Rs 1,223.30 following the announcement of the Jio Platforms IPO. Heavyweights ICICI Bank and HDFC Bank also helped lift the benchmarks.
“Buying interest strengthened through the session, supported by optimism around the ongoing earnings season and improved sentiment following the easing in crude oil prices,” said Ajit Mishra, SVP – Research, Religare Broking.
Added Vinod Nair, head of research, Geojit Investments, “Indian equities rallied sharply as concerns over stretched AI valuations and higher US inflation triggered a sell-off across tech-heavy global markets, improving India’s relative appeal and encouraging rotation toward domestic large-cap technology, private financials and defensive heavyweights.” He added that hope of possible reconsideration of equity taxation added to risk appetite.
On the BSE, 2,670 stocks declined against 1,716 advances, indicating that the rally was largely concentrated in a handful of heavyweight stocks. The Nifty Midcap 100 slipped 0.36%, while the Nifty Smallcap 100 fell 1.31%, suggesting that investors remained cautious about taking broader market exposure.
The divergence was also reflected in the relatively modest increase in overall market capitalisation. Despite the Sensex’s 1,534-point jump, investors’ wealth rose by just Rs 55,996 crore, taking the combined market value of BSE-listed companies to Rs 471.06 lakh crore.
Analysts cautioned that Thursday’s rally, while encouraging, did not necessarily signal a sustained turnaround. Persistent foreign fund outflows and geopolitical uncertainties could continue to weigh on sentiment.
Mishra said investors would closely watch upcoming corporate earnings and management commentary for clues on the market’s next move.
Siddhartha Khemka, head of research, wealth management, Motilal Oswal Financial Services, “ Indian equities are likely to consolidate within a broader range in the near term, with intermittent recoveries and bounds of selling pressure. The Nifty’s move back above 23,000 has improved domestic sentiment, while resilient domestic demand, strong tax collections and the ongoing Q2 earnings season provide a positive backdrop.”