Nifty, Sensex rally: Diwali fireworks! 5 reasons why stock market is rising today

A steep fall in crude oil prices amid hopes of US-Iran peace talks, a decline in bond yields, revived foreign inflows, a sharp appreciation in the rupee and strong corporate earnings are five key reasons why benchmark indices Sensex and Nifty gained today.

At 9.26 am, Nifty was trading 417 points, or 1.74 per cent, higher at 24,378. Sensex was quoting at 79,003, up 1,701 points, or 2.20 per cent. Calling the rally "Diwali fireworks", Vinod Nair, Head of Research at  Geojit Investments said risk appetite has strengthened. The US midterm election outcome has improved global sentiment, raising expectations of a more measured approach to trade and tariff policies and potentially supporting FII flows into emerging markets, he said.

"Domestically, optimism around possible tax relief maybe in the upcoming Union Budget, better-than-expected quarterly earnings and resilient festive consumption added momentum to the rally. Improving earnings visibility and healthy domestic demand should keep the near-term bias constructive, although geopolitical risks and crude oil volatility could trigger intermittent profit booking," Nair said.

Oil price tanks, down 18% this month  
Data showed crude futures slipped 1.01 per cent to $93.66 a barrel on Thursday, following an 8.67 per cent decline on Wednesday. Crude oil fell 1.12 per cent on Tuesday and 7.63 per cent on Monday, taking its cumulative decline this week to 18 per cent.

"Following the US midterms, the bargaining positions of the US and Iran in peace negotiations may reverse, with Iran becoming more willing to negotiate," Nomura said in a note.

Bond yields ease
Devarsh Vakil, Head of Prime Research at HDFC Securities said US government debt yields retreated across the curve, with the 10-year Treasury yield sliding to approximately 4.89 per cent. Concurrently, the US dollar posted its worst daily performance in two months as political expectations shifted. 
Dollar index has inverse relationship with emerging market equities such as India's.

"Investors rotated capital into fixed income, factoring in the possibility that a divided government would curb extensive federal spending plans and alleviate long-term inflationary pressures.

Earnings growth recovery
Earnings of the 35 Nifty companies that have declared results so far have grown 22 per cent YoY against MOFSL's estimate of 20 per cent YoY, led by Reliance Industries Ltd, JSW Steel Ltd, ICICI Bank Ltd, Coal India Ltd, and Axis Bank Ltd. These five companies contributed 59 per cent to the incremental YoY earnings growth.

"Corporate earnings have sustained their growth momentum in 2QFY27 so far, building on a meaningful recovery witnessed in 1QFY27 after two years of muted performance. More importantly, the recovery is not merely reflected in aggregate earnings growth but is increasingly broad-based across sectors, despite persistent commodity cost pressure and an uncertain global environment," MOFSL said.

FPI flows turn positive
Global funds have infused about $3 billion into Indian stocks on a net basis since mid-October, Bloomberg reported. NSDL data showed FPIs infused Rs 14,863 crore worth equities this month against a total of Rs 34,843 crore outflows in October and Rs 35,861 crore outflows in September.

India outperforms peers

Thanks to LTCG easing concerns, benchmark indices Nifty and Sensex have defied an Asia-wide selloff this quarter. A reversal in foreign investor flows has provided further support, with foreign portfolio investors (FPIs) turning net buyers in November, purchasing shares worth Rs 14,863 crore in just a few trading sessions.

Data showed Korean indices such as Kospi and Kosdaq lost 20 per cent each during the period; Japanese Nikkei 225 declined 7.25 per cent; Taiwan's Taiex has slumped 15 per cent while Singapore's Straits Times has fallen 7 per cent during the period. Chinese Shanghai Composite has fallen 4 per cent during the same period. Hong Kong's Hang Seng is flat. Overall, the MSCI Asia Pacific index has declined 7 per cent, suggesting outperformance of 14 percentage points by Nifty and Sensex that gained 6.7-7.4 per cent during the same period.

India's outperformance is supported by low starting expectations, reflected in valuations below post-pandemic averages across most sectors, and by the correction in AI stocks, Nomura said in a strategy note.

A possible LTCG cut for foreign institutional investors, the fall in global yields and expectations of the rupee holding up on central bank intervention lent further support.

"Oil prices remain a concern, although they have also corrected 7 oer cent from the recent peak. This momentum could take the Nifty past our March 2027F target of INR24,000, based on 17 times FY28F EPS. From a longer-term perspective, we think market concerns around geopolitical and technological uncertainty persist, weighing on long-term growth expectations," Nomura said.