Pre-Diwali rally at D-Street: Sensex jumps 3,000 pts in four sessions, Nifty adds 945 pts; investors richer by ₹13 lakh crore

Indian equity markets have staged a strong pre-Diwali rally, with the BSE Sensex surging more than 3,100 points and the Nifty 50 gaining around 945 points over four trading sessions since October 28. The rally has added nearly ₹12.85 lakh crore to investors’ wealth, taking the total market capitalisation of BSE-listed companies to ₹486.38 lakh crore from ₹473.53 lakh crore at the close of trade on October 28.

The 30-share Sensex has gained around 4.3% during the period, while the Nifty50 has advanced 4.16%. The recovery extended into Tuesday, with the Sensex rising 801.58 points, or 1.06%, to 76,494.36 and the Nifty climbing 218.70 points, or 0.93%, to 23,652.10 around 10:50 am.

The rally has been supported by a combination of easing geopolitical concerns, a sharp correction in crude oil prices, renewed foreign institutional investor (FII) buying and improving corporate earnings. Expectations of a possible reduction in long-term capital gains (LTCG) tax and securities transaction tax (STT) have also added to the positive sentiment.

Falling crude, hopes of US-Iran breakthrough lift sentiment

The sharp pullback in crude oil prices has been one of the key triggers for the market recovery. Brent crude has retreated towards $105 a barrel after falling sharply on Monday amid hopes of progress in diplomatic efforts to end the US-Iran conflict.

For India, which relies heavily on imported crude, lower oil prices can ease pressure on the import bill, inflation, the current account deficit and corporate input costs. A sustained decline could also provide relief to companies facing higher energy and transportation expenses.

Ponmudi R, CEO of Enrich Money, said Indian equities could extend their recovery as easing crude prices and hopes of de-escalation in the Middle East improve investor sentiment. However, he cautioned that the sustainability of the rally would depend on global market cues, progress in US-Iran negotiations and the broader direction of investor sentiment.

Hariselvan Radhakrishnan, Founder and CEO of HST Wealth, said the correction in crude had unwound a significant portion of the geopolitical risk premium. A sustained moderation in oil prices could help broaden the equity recovery beyond a handful of heavyweight stocks, although any breakdown in diplomatic efforts could revive volatility.

FIIs return, earnings provide support

A key positive for the market has been the return of foreign investors after months of sustained selling. Foreign portfolio investors bought Indian equities worth ₹3,114.68 crore on November 2, according to provisional exchange data. The buying has helped improve confidence that foreign flows could gradually turn supportive if global conditions remain favourable.

The improvement in sentiment comes after foreign investors remained heavy sellers in October. Their renewed buying, alongside relatively attractive valuations in select large-cap stocks, has helped support the ongoing recovery.

Strong September-quarter earnings have provided another important trigger. Reliance Industries emerged as a major driver of Monday's rally, with its shares surging 11.6% after reporting better-than-expected results. The stock's sharp rise also triggered significant short covering, adding to the gains in the benchmark indices.

V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said, “Circumstances are ideal for the continuation of the ongoing market rally. Decline in Brent crude to $104, further weakening of the AI trade, continuing flow of good Q2 results and FIIs turning buyers have potential to accelerate the ongoing rally.”

He pointed to the unusual surge in Reliance Industries, saying that delivery-based buying of around ₹6,413 crore, supported by strong Q2 results, had triggered massive short covering. “The takeaway from this experience is that patient value buying will be rewarded,” he said.

Vijayakumar added that short positions in several quality large-cap stocks, built on expectations of continued FII selling, could come under pressure as market conditions change.

Tax relief hopes add to optimism

Expectations of a possible reduction in LTCG tax and STT have also contributed to the improvement in investor sentiment. Market participants believe that a reduction in the tax burden on equity investments could improve post-tax returns, encourage participation and make Indian equities more attractive to domestic and foreign investors.

However, these expectations remain a sentiment driver rather than an announced policy change. Any actual relief would depend on government decisions.

The weakening of the global AI trade has also been seen as a relative positive for Indian equities. Vijayakumar said the correction in AI-linked stocks could redirect investor attention towards other markets, including India, but cautioned that the current weakness in the AI segment should be viewed as a correction rather than a crash.

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