Sensex settles 600 pts higher, Nifty ends above 26,150: Positive global cues among key factors behind market rally

Stock market today: Sensex, Nifty rise amid strong buying in the market. 

The equity benchmark indices Sensex and Nifty settled nearly 1 percent higher on Monday, extending gains from the previous session, tracking positive global cues and renewed foreign fund inflows. The expectations of interest rate cuts by the US Federal Reserve next year also boosted the sentiment.

Rising for the second straight session, the Sensex jumped 638.12 points or 0.75 percent to settle at 85,567.48. During the day, it surged 671.97 points or 0.79 percent to 85,601.33. The Nifty climbed 206 points or 0.79 percent to close above the 26,100 mark at 26,172.40.

Among the Nifty 50 stocks, Shriram Finance, Infosys and Wipro were the top gainers, rising up to 4 percent. UltraTech Cement and SBI Life Insurance Company were among the laggards, slipping up to 0.3 percent. Market breadth remained positive, with 2,487 stocks advancing, 911 declining and 200 remaining unchanged.

Factors driving the rally

1) Foreign fund inflows: Foreign Institutional Investors (FIIs) turned buyers after 14 straight sessions of selling. FIIs purchased equities worth Rs 1,830.89 crore on Friday, taking their total buying to about Rs 3,776 crore over the last three sessions.

"While sustained DII participation continues to absorb intermittent selling pressure, FIIs turning net buyers after a prolonged phase of outflows has provided an additional boost to market confidence, Ponmudi R, CEO of Enrich Money told PTI.

2) Fed rate cut expectations: Market participants are factoring in two interest rate cuts by the US Federal Reserve in 2026, following recent economic data that failed to significantly alter the policy outlook.

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3) Positive global cues: Asian markets traded higher, with South Korea’s Kospi, Japan’s Nikkei 225, Shanghai’s SSE Composite and Hong Kong’s Hang Seng index in the green. US markets ended higher on Friday, while US futures were trading up to 0.3 percent higher, indicating a positive start for Wall Street.

"It appears that the market is heading for a year end rally. Two factors that can accelerate this rally are the sharp reversal in the rupee and the FIIs turning buyers in the cash market. These two factors which are mutually reinforcing can trigger short covering in the market helping the benchmark indices to scale higher highs," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.

4) Rupee gains: The rupee appreciated 22 paise to 89.45 against the US dollar in early trade, supported by foreign fund inflows and firm domestic equities. A stronger rupee tends to support equities by easing imported inflation concerns and improving foreign investor sentiment.

5) IT stock buying: Shares of IT firms jumped, pushing the Nifty IT index into the green for the fourth consecutive session. Rising hopes for further rate cuts by the Federal Reserve and soaring Infosys ADR were among the key factors behind the sharp rise.

Along with the softer US inflation data, positive commentary by the American central bank’s management also boosted hopes for more rate cuts. Federal Reserve Governor Christopher Waller on Wednesday said that the American central bank still has room to cut interest rates amid rising job market weakness.

Infosys, Wipro, other IT shares rise for 4th day due to ADR surge, four other reasons

6) RBI Minutes Meeting: The minutes of the Reserve Bank of India's December policy meeting showed that a potential moderation in economic growth next year, along with subdued inflation, could open space for more interest rate cuts.

Technical Analysis

Anand James, Chief Market Strategist at Geojit Investments Ltd, said the Nifty appeared better placed to attempt an upward move after holding above the previous week’s low. "This points towards a possible bottom formation, with an initial target of 26,300. However, failure to sustain above 25,980 could lead to sideways movement," he said.

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