Why Sensex, Nifty are rising today: What triggered the stock market recovery and what's next?

Indian equity benchmarks rebounded sharply in Thursday's trade, with benchmark indices climbing over 1 per cent amid value buying in select sectors despite concerns centred around elevated crude oil prices, rupee weakness and persistent foreign investor outflows.

At last check, the 30-share BSE Sensex surged 943.82 points or 1.27 per cent to 75,552.80, while the NSE Nifty50 advanced 319.25 points or 1.36 per cent to 23,731.90.

The broader market trend remained mixed. Nifty Midcap 100 gained 0.78 per cent, whereas Nifty Smallcap slipped 0.15 per cent.

Experts largely attributed the rally to bargain hunting following the recent correction, though they warned that near-term volatility could continue.

Kranthi Bathini, Equity Strategist at WealthMills Securities, said buying interest emerged in select pockets after recent declines. However, he advised investors to stay cautious at higher levels, adding that the current environment favours a 'buy-on-dips' and 'sell-on-rallies' strategy.

Market veteran Arun Kejriwal also urged investors to remain in 'wait-and-watch' mode over the next few sessions.

Meanwhile, macroeconomic concerns persisted after the rupee touched a fresh record low against the US dollar amid rising crude prices and escalating tensions in West Asia. The domestic currency weakened to 95.86 per dollar in early trade on Thursday.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, said sustained rupee depreciation has emerged as a key concern for the economy.

"If crude remains elevated for an extended period, the rupee will move to 100. The other major drag on the rupee is the sustained selling by FPIs in the Indian market. Money is moving into markets like the US, Japan, South Korea and Taiwan, which are doing very well. So long as the outperformance of these markets and the underperformance of India continues, FPIs will continue to sell, which, in turn, will further drag the rupee down," he said.

According to Vijayakumar, conditions may improve only if crude oil prices cool or global fund flows towards AI-driven markets moderate.

"The situation will change only if the Strait of Hormuz is opened and crude price falls, or the AI trade, which is attracting FPI flows into the AI leaders, ends. There is no clarity on when this will happen," he added.

Rohit Sarin, Co-Founder of Client Associates, said the recent swings in the market indicate that investors are increasingly factoring in future macro risks rather than only reacting to immediate developments.

"One of the key triggers this week was the Prime Minister's observation that if crude oil prices do not normalise, inflationary pressures could build. For India, a large net importer of oil, this is not a trivial concern. Higher crude prices can widen the current account deficit, put pressure on the rupee, and keep interest rates elevated for longer," Sarin noted.

He added that while foreign institutional investors (FIIs) remain cautious amid geopolitical uncertainty and better opportunities overseas, domestic inflows are helping provide stability to the market.

"Domestic investors, through SIPs and direct equity participation, are increasingly providing a marginal source of capital. That is an important change. It means India is becoming less dependent on foreign flows to sustain market depth, although not entirely insulated from global sentiment," Sarin said.

Sarin further stated that corrections may continue whenever valuations become expensive and macro pressures intensify. However, he believes India's long-term growth story remains supported by infrastructure spending, formalisation, digital adoption and rising domestic savings.

"The market may remain volatile in the near term, but the long-term case for Indian equities remains compelling," he said.