Sensex, Nifty resume upmove; key factors behind strong surge

Indian equity benchmarks witnessed a sharp rebound on Monday after a brief pause, supported by renewed buying interest and positive cues from foreign investors. The 30-share BSE Sensex pack jumped 567 points or 0.67 per cent to close at 84,779, while the broader NSE Nifty index climbed 171 points or 0.66 per cent to 25,966 level. Broader indices, including mid- and small-cap segments, also participated in the rally.

Market experts attributed the upmove to improved investor sentiment, strong corporate earnings, and easing foreign institutional investor (FII) outflows.

"We are witnessing renewed buying interest in the market. FIIs have become net buyers in the previous week. Index-wise, Nifty50 has to sustain above the 26,000 level for any further upmove. There were largely no negative surprises in corporate earnings. The underlying economy is going strong and the second half of the financial year could deliver better earnings quarters," said Kranthi Bathini, Director of Equity Strategy at WealthMills Securities.

According to VK Vijayakumar, Chief Investment Strategist at Geojit Investments, the declining trend in FII selling, which began in early October, continues. "FIIs turned buyers in many sessions of October. Total FII selling through exchanges up to October 25 stood at a negligible Rs 3,363 crore, while their investment through the primary market amounted to Rs 10,692 crore," he noted, citing NSDL data.

He added that this trend of primary market investments by FIIs has been a consistent source of profit and is likely to continue. Several factors may support further FII buying, including the narrowing valuation gap between India and other markets, improving earnings momentum, record Diwali sales signalling robust consumption and potential progress on a trade deal between India and the US.

Buying interest in select heavyweights such as Reliance Industries Ltd, Bharti Airtel, HDFC Bank, State Bank of India (SBI), ITC Ltd, Axis Bank and Tata Consultancy Services (TCS) lifted the indices higher.

Investor wealth, as suggested by the BSE market capitalisation (m-cap), rose around Rs 3 lakh crore to Rs 471.92 lakh crore today compared with a valuation of Rs 468.92 lakh crore recorded during the previous session.

Nifty outlook

"The current setup looks favourable for a further rally in the index, with dips likely to be bought into. On the lower end, support is placed at 25,700, below which weakness might emerge. On the higher end, resistance is seen at 26,000; a decisive move or close above this level could trigger a rally towards 26,500 in the short term," stated Rupak De, Senior Technical Analyst at LKP Securities.