Sensex, Nifty 50 at record high: Can strong Q2 GDP growth trigger a wider market rally?

Indian stock market at record high: Indian markets hit a fresh record high on Monday, December 1, after India’s Q2 GDP growth accelerated to a six-quarter high in the July–September period of FY26, expanding by 8.2%, comfortably beating market expectations and outpacing the 7.8% recorded in the previous quarter. The government released the data on November 28, highlighting strong performance in manufacturing and broad-based resilience across financial services, real estate and professional services. Sensex rose 452 points to its record high of 86,159.02, while the Nifty 50 jumped 123 points to its new high of 26,325.80. Economists attributed the robust print to favourable statistical dynamics and gradual policy transmission. Madhavi Arora, Chief Economist at Emkay Global Financial Services, said the upside surprise was notable. “Growth has exceeded expectations dramatically to 8.2%, led by statistically favourable deflator effects, lagged effects of monetary and regulatory easing and limited hit so far on India’s exports,” she said. Arora added that momentum is likely to remain strong through the next quarter as well, supported by healthier consumer demand. “Some of these factors will spill on to 3Q as well, along with improvement in consumer demand, leading to FY26E GDP comfortably hugging 7%+ print,” she noted. The immediate reaction in equity markets was positive, with both the Sensex and Nifty rising around half a per cent after the data release. Analysts suggested that the print reinforces India’s fundamental resilience at a time when global economic conditions remain uneven and emerging markets face steady outflows. A stable macroeconomic environment also enhances the probability of foreign capital returning after several weeks of cautious selling. Will Markets Attempt a Participatory Rally? With benchmarks hovering near all-time highs, the key question for investors is whether the market is gearing up for a broad-based, more participatory rally, rather than a narrow uptrend led by a few heavyweights. Early indications show improving investor sentiment, though analysts caution that volatility may persist. Charmi Shah, Business Head, Wealth1 – PMS & AIF Investments, believes the domestic backdrop remains favourable even as short-term uncertainties continue. Shah said that changing global expectations could improve India’s relative attractiveness. “With odds of a December Fed rate cut jumping to about 70% from roughly 44% a week earlier, emerging markets such as India become more attractive for foreign investors,” she noted. She expects the Nifty to attempt fresh highs but advises investors to remain cautious. “For now, I think that the balance of probabilities favours Nifty attempting a new high this month, but with the caveat that investors should brace for range-bound moves and quick reversals rather than a smooth one-way rally,” Shah said. Sandeep Pandey, Co-founder of Basav Capital, said that robust GDP data, prospects of RBI and Fed rate cuts, a decline in crude oil to a one-month low of $62/bbl, and renewed optimism for a Russia–Ukraine peace deal are expected to support market sentiment. He believes that these factors could trigger a rating upgrade, which in turn could make the Indian stock market attractive for foreign institutional investors, sparking a broader market rally. Echoing similar views, Avinash Goranskar, a SEBI-registered analyst, told Mint that following a strong GDP print, the rally on Dalal Street is expected to become a participatory rally, as bulls may start looking for value picks in the mid-cap and small-cap segments. The GDP data also supports the broader corporate earnings trajectory. Stronger growth generally translates into firmer demand, better pricing power for businesses and healthier operating leverage—factors that investors watch closely when evaluating long-term market valuation comfort. Where Investors Should Focus Now? Sector rotation is likely to become a defining theme in the coming weeks as traders position themselves ahead of multiple triggers, including the RBI’s monetary policy announcement on December 5 and monthly auto sales data. According to Pandey, the setup favours sectors aligned with domestic strength. He said financials, autos and real estate could remain in focus due to improving credit demand, strong festive-season auto momentum and rising home-buying sentiment. He also expects oil marketing companies to benefit from falling crude oil prices, which recently hit a one-month low, easing margin pressures. IT stocks may also attract renewed attention if expectations of a US rate cut strengthen further, easing global spending constraints on technology clients. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.