In the week leading up to Diwali, India’s stock market has made an impressive comeback, rewarding investors after five days of downturn. On October 28, Sensex surged by nearly 1,000 points, while Nifty saw a significant increase, surpassing the 24,400 mark. Both indices rose sharply, with gains across sectors including finance, real estate, and oil and gas. Midcap and smallcap stocks joined in, signaling a market-wide recovery. Here’s a look at the six major reasons behind this rally:
1. Investors “Buying the Dip” Amid Market Pullback
After a steady decline, many investors saw an opportunity in the dip, especially within midcap and smallcap sectors. Both sectors had fallen approximately 9% from their recent highs, creating a perceived buying opportunity. While the buy-the-dip strategy is common, experts still urge investors to be cautious and avoid premature conclusions about market stability.
2. Signs of Recovery After Persistent Decline
The market’s dip last week was largely driven by foreign investors offloading shares and taking short positions. However, some of these positions were covered on Friday, hinting at a potential recovery in the near term. Technical analysts now predict that Nifty may target the 24,470 to 24,700 levels, with a support range of 24,000 to 23,800, creating a stronger foundation for growth.
3. Broader Market Gains Across Sectors
The positive momentum was not limited to large-cap stocks; midcap and smallcap indices also posted solid gains, with Nifty Midcap up 0.81% and Nifty Smallcap rising by 1.31%. This indicates renewed investor confidence across a wide range of companies and sectors, suggesting robust market sentiment and further supporting the rally.
4. Eased Middle East Tensions
Investor sentiment also improved on news of stabilizing tensions in the Middle East. With no further escalation between Israel and Iran, market volatility due to geopolitical concerns has eased. Egyptian President Abdel Fattah al-Sisi’s proposed temporary ceasefire between Israel and Hamas has also raised hopes for reduced conflict, which could keep international markets more stable in the near future.
5. Steady Crude Oil Prices Calming Market Concerns
The stability in crude oil prices has also played a role in boosting the market. After initial concerns over the Iran-Israel situation, oil prices have settled around $74.38 per barrel. Earlier in October, Brent crude prices rose by 8% on geopolitical worries, but recent stagnation has calmed markets, easing pressure on related sectors.
6. ICICI Bank’s Strong Quarterly Performance
Positive quarterly earnings reports from major players like ICICI Bank have bolstered the market. ICICI reported a 14.5% year-on-year increase in net profit, reaching ₹11,746 crore for the September quarter. This led to a more than 4% rise in ICICI’s stock, lifting the Nifty Private Bank index by nearly 1%. Bandhan Bank also saw a significant gain of over 9%, further contributing to overall market growth.
Market Insights Moving Forward
As investors look forward to Diwali, these factors collectively create an optimistic outlook for India’s stock market. With stabilized oil prices, a potential easing of international tensions, and strong quarterly results from key financial players, the markets appear to be setting up for a promising festive season.
