Bulls Charge Up: Market Soars, Sensex & Nifty Jump Over 1% Each; Reasons Why Stock Market Is Rallying

The Indian stock market witnessed a robust recovery on Thursday, December 5, as both benchmark indices, the Sensex and Nifty 50, rebounded strongly, surging over 1% in afternoon trade. The rally, which shrugged off the morning session's weakness, came on the back of a confluence of domestic and global factors, lifting investor sentiment and market capitalisation.

The Sensex, which opened at 81,182.74 against its previous close of 80,956.33, dipped 489 points to hit an intraday low of 80,467.37. However, a sharp recovery saw the index climb more than 1,850 points from the day's low, touching a high of 82,317.74.

Similarly, the Nifty 50 mirrored this trend, opening at 24,539.15 and slipping 172 points to an intraday low of 24,295.55. It then surged nearly 2% from the low to peak at 24,857.75 during the session.

While the benchmark indices showed a stellar recovery, midcap and smallcap segments underperformed slightly, rising by 0.5% on the BSE. Nonetheless, the rally added approximately Rs 3 lakh crore to investors' wealth as the overall market capitalisation of BSE-listed firms increased from Rs 455.7 lakh crore in the previous session to Rs 458.7 lakh crore.

The market rally was broad-based, with several sectoral indices contributing to the upward momentum. Nifty IT jumped over 2%, with IT heavyweights like Infosys, TCS, Wipro, and Tech Mahindra leading the pack.

Nifty Bank and Financial Services gained around 1%, buoyed by optimism surrounding the upcoming RBI monetary policy decision. Nifty Auto and Nifty Oil & Gas both indices also registered gains of approximately 1%, reflecting robust buying interest. Realty, PSU Bank, and Media indices saw some weakness as profit booking set in, limiting their gains.

What Is Driving The Rally?
RBI Policy Optimism
The anticipation of a cash reserve ratio (CRR) cut in Friday's RBI monetary policy announcement played a pivotal role in the market's rebound. A reduction in CRR is expected to inject liquidity into the banking system, improving profitability for financial institutions and boosting overall market sentiment.

Revival in Earnings Growth
After a subdued Q2 earnings season, investors are hopeful for a revival in corporate earnings in Q3FY25. This expectation has triggered stock-specific activity and portfolio reshuffling, adding momentum to the rally.

FII Buying Resumes
Foreign institutional investors (FIIs), who were net sellers in October and November, have turned aggressive buyers in December. On Wednesday, FIIs purchased Rs 1,798 crore worth of Indian equities, following a robust net buying of Rs 3,665 crore on Tuesday. With Rs 5,224 crore infused month-to-date, this trend marks a sharp reversal from their net outflows of Rs 1.6 lakh crore during the prior two months.

Global Sentiment and Fed Optimism
Global factors also played a crucial role. US Federal Reserve Chairman Jerome Powell's remarks about better-than-expected US economic performance boosted risk sentiment worldwide. The Dow Jones Industrial Average hitting a record high of 45,000 further signalled investor optimism, which spilled over into Indian markets.

Blue-chip stocks led the rally, with heavyweight IT companies driving gains Titan Company rose 1.8% to Rs 3,425. Infosys, TCS, Wipro, Tech Mahindra, and Dr Reddy's Laboratories posted gains between 1-2%.

The sharp rebound in the Indian stock market reflects a mix of global optimism, FII inflows, and expectations of domestic policy support. With the RBI's monetary policy decision set to be announced on Friday, market participants remain optimistic about a liquidity boost and sustained economic recovery.