Sensex Climbs 500 Points: 3 Key Factors Driving Today's Stock Market Rally

The stock market bounced back on Thursday after six consecutive days of losses. Both the Sensex and Nifty opened higher, regaining some of the ground lost in recent sessions.

The Sensex and Nifty have dropped nearly 12% from their recent peaks, largely due to global uncertainties, with US President Donald Trump’s tariff threats driving foreign institutional investors (FII) to sell. However, Thursday’s recovery came after inflation cooled to a five-month low, boosting investor confidence.

By 10:48 AM, the S&P BSE Sensex was up by 47.85 points, reaching 76,644.93, while the NSE Nifty50 gained 137.75 points, touching 23,183.00.

Why is the stock market rising?

Cooling inflation boosts sentiment

One of the key drivers of the market’s rebound is a dip in consumer price index (CPI) inflation.

Inflation in January dropped to 4.31%, down from 5.22% in December 2024. The decrease in inflation has raised expectations that the Reserve Bank of India (RBI) may reduce interest rates, which would benefit businesses and consumers. Lower interest rates reduce borrowing costs, stimulating both spending and investment.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “A positive domestic factor is the better-than-expected reduction in CPI inflation to 4.31% in January from 5.22% in December 2024. This inflation decline supports the MPC’s potential rate cut this month and could pave the way for a 25 basis point cut in April. This is positive for the stock market in general, especially rate-sensitive sectors.”

Global cues and hopes from Modi’s US visit

Another reason behind the market's recovery is the rebound in global stock markets.

Investors are closely watching Prime Minister Narendra Modi’s visit to the US, with hopes that the talks will lead to trade agreements, easing trade tensions between the two nations.

Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, commented, "After days of high volatility and heavy selling in mid- and small-cap stocks, we're seeing renewed buying interest. Global markets are recovering, and investors are hopeful that the US-India trade talks will yield positive results. This is improving sentiment for the short to medium term."

Support at key market levels

The market is also finding support at critical psychological levels. The Nifty has remained above the 23,000 mark, which is seen as a key level by traders and investors.

Bathini added, "The Nifty holding above the 23,000 level is crucial. As long as this level is maintained, the market could stay positive. However, we are in a range-bound market, where rallies may not last long. Some bottom-fishing is happening, with investors purchasing stocks that have fallen significantly in anticipation of a recovery."

Despite today’s gains, one concern for the market is the continued selling by foreign institutional investors. FIIs have been net sellers in February, pulling funds out of Indian markets. Their selling has contributed to the recent market decline.

Experts say that while the market is showing signs of recovery, it remains uncertain whether the uptrend will continue. Investors will be keeping a close eye on global markets, trade negotiations, and FII activity in the days ahead.