Sensex surges 2,100 pts in 4 sessions; will market extend rally on Budget day?

Despite persistent fund outflows by foreign portfolio investments and fragile global equity market, Indian equities have shown resilience this week, with benchmarks Sensex and Nifty rising nearly 3% in pre-Budget rally. The BSE Sensex reclaimed 77,500 mark by adding 2,130 points in the last four days, while the NSE Nifty surged 679 points to achieve crucial level of 23,500 as market saw buying momentum in run-up to Union Budget 2025, slated to be presented today.

Will market extend upward journey for 5th consecutive session? The Indian share market is expected to see muted opening amid weak cues from global peers. The exchange has decided to conduct special trade today in wake of the Union Budget 2025-26. Ahead of the crucial Union Budget, the domestic bourses closed higher on January 31, with the Sensex rising 0.97% to 77,500 points, and the Nifty gaining 1.11% to 23,508.4 points. The broader markets saw even stronger gains, with the BSE MidCap and SmallCap indices surging over 3.5% each.

All eyes will be on Finance Minister Nirmala Sitharaman, who will table the first full-fledged budget of the Modi 3.0 government in Parliament at 11 AM, with hope that the government would strike a balance between fiscal deficit, capex for growth and social spending to revitalise the world’s fifth largest economy.

Trump’s tariff plan may put pressure

In the overnight trade, Wall Street ended lower, paring early gains, after the White House confirmed that tariffs on Mexico and Canada would take effect from February 1. President Donald Trump’s administration is set to impose 25% tariffs on Canadian and Mexican imports, while he has also warned BRICS countries that they will face 100% tariffs if they replace the U.S. dollar with their other currency. At the close, the Dow Jones Industrial Average was down 0.75%, the S&P 500 dropped 0.5%, and the Nasdaq Composite lost 0.3%.

India VIX cools down

India VIX, an index that measures volatility, dropped 6.57% to 16.24 on Friday, while it declined 8.7% so far this week, indicating some ease in investor sentiments. However, as VIX remains above 15 level, it indices that market volatility may persists.

DIIs counter FIIs exit

The sustained selling by foreign institutional investors (FIIs) have been countered by strong buying by domestic institutional investors (DIIs), which has provided much need cushion to the market. Since October 2024, FIIs have sold equities worth $24 billion in the secondary market amid valuation concerns, while DIIs made net investment of $29 billion during the same period. In January alone, FIIs sold $5.5 billion in the secondary market, while DIIs purchased $6.6 billion worth of equities, as per the NSDL data.

Technical chart indicates sustained buying

Nifty index extended its bullish streak and closed decisively above 23,500 on Friday, reflecting strong upward momentum. The index maintained a firm trajectory on the daily chart and sustained trade above the 20-day exponential moving average (EMA) coupled with the Relative Strength Index (RSI) of over 50 indicate bullishness.

“On the daily chart, the index successfully confirmed a breakout above its previous swing high of 23,400, reinforcing bullish sentiment. The immediate support zone has now shifted higher to 23,350–23,300, while 23,670 emerges as a key resistance, posing a crucial test for further upside,” says Dhupesh Dhameja, Derivatives Analyst, SAMCO Securities.

“As long as Nifty stays above 23,300, buying opportunities are expected to emerge, favouring a "Buy-on-Dips" strategy. A decisive move above 23,550 could accelerate the rally, setting the stage for further gains in the upcoming sessions,” he adds.

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