Stock market: 5 reasons why Sensex, Nifty are on a winning spree

Stock market: Benchmark stock indices Sensex and Nifty climbed over 1 per cent each on Thursday to take their winning run to the fourth straight session. The rise in equity benchmarks has been seen amid a recovery in rupee that hit a two-month high today. This, along with recent economic data, has raised hopes that the persisting foreign outflow trend may soon reverse. 

Analysts said the recent sharp correction on Dalal Street has also removed valuation forth in the market. 

Add to that is a dovish Fed commentary that suggested two Fed rate cuts still likely this calendar, despite rising risks of stagflation in the US economy. 

While there remains concerns over the US tariff war, crude oil prices have eased on global growth worries that added to the investor sentiment. Technical factors too played a role in the market rally. 

On Thursday, the BSE Sensex settled at 76,348.06, up 899.01 points or 1.19 per cent. Nifty rose 283.05 points or 1.24 per cent to 23,190.65. The two indices gained 3.4-3.5 per cent in the four-day rally. 

“The market is showing signs of stability. Much of the valuation froth has subsided and most indices, including SMIDs, are trading below their long term averages. FPI selling has also abated. The sustainability of this rally will be determined by how well FY26 earnings forecasts hold up during the April 2025 earning season,” Emkay Global said.

Rupee rise, halt in FPI outflows
There are hopes that a strengthening rupee may put a halt to foreign outflows that stood at Rs 33,869 crore this month so far, in line with February figure but far less than January’s Rs 78,027 crore outflows. 

“Consistent fall of the dollar index (DXY) has reduced the intensity of FII selling while DII buying continued to be strong, thus triggering the recent upside. Supportive domestic data indicating a MoM rise in economic activity and the view that more rate cuts are envisaged during the year are adding to the attractiveness of equity,” said Vinod Nair off Geojit Financial Services.
 
The dollar index has started easing from a recent high of 108 level to 103 level and a dovish US Fed commentary despite risks of stagflation has triggered hopes that two Fed rate cuts are still in the offing. The rupee last traded at 86.36 a dollar level. 

Dovish Fed
To be sure, the US Fed kept policy rate unchanged overnight. It revised lower the 2025 GDP growth to 1.7 per cent from 2.1 per cent and projected a higher core PCE inflation of 2.8 per cent against 2.5 per cent earlier, hinting at a stagflation (low growth, high inflation) ahead. 

But the Fed Chairman Jerome Powell came off a little dovish in the presser, as he did not sound too concerned about inflation expectations and was inclined to view the rise in inflation due to tariffs as transitory,” said Emkay Global’s Madhavi Arora. She noted that this view was also reflected in Fed’s unchanged core PCE projections for 2026 and 2027. 

Market valuations
YES Securities noted that the spread between the PE ratio of Nifty and the broader Emerging Market (EM) index has narrowed significantly, approximately 1 standard deviation (SD) below the average. 

“This correction reflects a decline from previous highs, where the spread exceeded +1 SD. The 12-month forward PE trend indicates a persistent narrowing, suggesting that India’s valuation premium over EM has shrunk, though it continues to trade at a premium given its higher ROE,” the brokerage noted. 

This brokerage noted that India stands out with an expected 1-year forward ROE of 15 per cent, better than many EMs, including Malaysia, China, South Korea and Philippines. ROE projection suggests that Indian markets may offer superior profitability prospects, potentially justifying its sustained valuation premium despite recent corrections, YES Securities said.

Siddharth Mehta, Founder & CIO of Bay Capital, said, “Institutional investors are reallocating capital towards India as geopolitical risks surrounding China grow. While China’s valuations may appear attractive, its long-term uncertainty makes India a more compelling choice.”

Oil prices 
Brent oil futures for May delivery last traded at $70.83 a barrel. It hit a high of $82.63 a barrel on January 15, but is falling since.  Given strong supply and sluggish demand growth, the oil market should be in a small (0.2mbd) surplus in 2025 against previous forecast of a balanced market, HSBC said on March 18.

“In 2026 we expect the surplus to grow to over 1mbd if OPEC+ continues to increase production as planned, pointing to more downside risks as the year progresses. Our Brent prices for 2025 and 2026 remain $73/barrel and $70/barrel,” it said.

Technical factor
Shrikant Chouhan, Head Equity Research at Kotak Securities noted that Nifty and Sensex successfully cleared the 50-day SMA (Simple Moving Average) level and also their resistance levels of 23,000 and 75,700 respectively, which is largely positive. 

Bajaj Broking noted that Nifty formed a strong bull candle with a bullish gap below its base (22,940-22,973), signaling continuation of the positive momentum. 

“A follow through move above 23,200-23,250 will signal continuation of the up move towards 23,500 levels. A failure to do so will lead to some consolidation in the range of 22,800-23,200 as the daily stochastic has approached overbought territory after recent sharp up move of 1,200 points in the last 12 sessions,” it said.

What’s next?
Analysts believe developments such as the forthcoming March quarter earnings season and US tariffs on Indian imports starting April 2 will be crucial to track. Emkay Global said the Nifty EPS forecast of 13.6 per cent has little downside risk to it, fueled by a discretionary consumption recovery. 

In the short term, BFSI should outperform as liquidity easing and investors bottom-fish. In the medium term, however, the brokerage prefers consumer discretionary, healthcare and real estate.