(Image Source: Mint)
Indian stock markets bounced back on Thursday after a two-day selloff, with both major indices finishing firmly in the green. The recovery came after the US Federal Reserve cut interest rates by 25 basis points, easing concerns about global monetary tightening that had weighed on emerging markets.
The BSE Sensex rallied 442 points to close at 84,789.88, up 0.47 percent. The NSE Nifty 50 jumped 139.30 points to end at 25,897.30, a gain of 0.54 percent. The rebound marks a meaningful recovery from Wednesday’s weakness when both indices had tumbled to their lowest levels in nearly a month.
Broad-Based Strength Across Sectors
Unlike the previous session, where selling was concentrated in a few pockets, today’s gains were spread across almost all sectors. Except for oil and gas, every major sectoral index traded in positive territory. This broad-based strength suggests that confidence is returning to the market after three days of consistent weakness.
Infosys led the charge among technology stocks, climbing 0.83 percent. Tata Steel surged higher with a gain of 0.78 percent, benefiting from general strength in metals. Other notable gainers included Bajaj Finserv, Adani Enterprises, Shriram Finance, and Hindalco Industries. Midcap and smallcap indices also participated in the rally, gaining 0.57 percent and 0.45 percent, respectively.
Who Struggled
Not all stocks participated in the recovery. Asian Paints slipped 0.73 percent, while Titan Company, Bharti Airtel, Interglobe Aviation, and HDFC Life faced selling pressure. Power Grid Corporation also saw weakness, as did some FMCG names that have been under pressure amid broader valuation concerns.
The losing stocks were primarily defensive names and some highly valued consumer discretionary plays. This suggests investors aren’t quite ready to abandon their rotation back toward economic-recovery plays like metals, automobiles and financials.
The Fed Factor
The trigger for today’s bounce was straightforward. After the Federal Reserve announced its 25 basis point rate cut on Wednesday, global risk appetite improved. The cut signaled that the central bank isn’t planning to maintain higher rates for extended periods, easing fears about a prolonged period of expensive money.
For India and other emerging markets, Fed rate cuts matter significantly. When US interest rates are high, foreign investors are tempted to park money in safe US Treasury bonds instead of risking capital in emerging market stocks. When rates come down, India becomes relatively more attractive again.
Foreign Selling Continues
Despite the market rally, foreign investors continued their selling spree. FIIs pulled out Rs 1,651 crore on Wednesday, extending their withdrawal streak to multiple sessions. The exodus reflects lingering caution about valuations and the global macroeconomic backdrop.
However, domestic institutional investors stepped in aggressively. DIIs purchased Rs 3,752 crore worth of shares on the same day, essentially absorbing the foreign selling and preventing sharper declines. This support from local money has been crucial in preventing the market from breaking down into technical weakness.
Key Sectors and Stock Performance
Within the Nifty 50, automobile stocks stood out with a gain of 1.01 percent. Metals were also strong, advancing 0.98 percent. IT stocks rallied 0.49 percent while financials climbed 0.42 percent. Banking stocks, which had taken heavy selling earlier, showed signs of stabilization.
Among individual stocks, Kotak Mahindra Bank emerged as a major gainer. Jio Financial Services also attracted buying interest. In the auto space, Maruti Suzuki participated in the sector rally. Among metals, most names moved higher as global commodity prices stabilized following the Fed cut.
What Happens Next
The big question now is whether today’s rally has enough momentum to hold or whether we’re simply seeing a dead-cat bounce in a bearish market. Analysts are watching the 25,700-25,800 level on the Nifty as critical support. If the index breaks below that, weakness could extend toward the 100-day moving average around 25,400-25,500.
On the upside, resistance sits around 26,000-26,200 levels. Getting the Nifty to clear that zone convincingly would suggest that the worst of the selling might be over.
Why Valuations Still Matter
It’s worth noting that despite the rally, many analysts remain cautious about near-term prospects. The market was trading at stretched valuations before the recent selloff, and while prices have come down, they haven’t come down enough for many to turn aggressively bullish.
High valuations have been cited as a reason for the steady supply of shares hitting the market. This is creating an exit window for private equity investors and promoters who bought at lower prices years ago. That supply is likely to cap how much further the rally can go without fresh positive catalysts.
The Broader Picture
For investors, today’s rally shouldn’t be mistaken for a full recovery. Yes, the Fed cut rates. Yes, foreign investors might eventually come back. But the questions about global growth, US-India trade relations, and whether Indian companies can keep delivering earnings growth remain unanswered.
The market has proven it can bounce. The real test will be whether it can consolidate these gains and build from here. For now, the Indian market is taking the Fed rate cut as a relief rally and not much more. Only time will tell if it becomes something more meaningful.
