Equity benchmarks surged on Wednesday, with the Sensex rising over 500 points and broader indices gaining up to 2.5 percent, driven by strong global cues and optimism over the US Federal Reserve’s outcome. Buying interest was seen across sectors, led by media, IT, and mid- and small-cap stocks.
Sensex jumped 631.55 points or 0.83 percent to settle at 76,532.96. During the day, it jumped 698.32 points or 0.92 percent to 76,599.73. The NSE Nifty soared 205.85 points or 0.90 percent to 23,163.10.
Key Factors Behind the Market Rally
1) Positive Global Cues: Technology stocks drove gains in Asian markets, mirroring the rebound in Wall Street equities. US stocks ended higher overnight as artificial intelligence (AI)-linked technology shares, including Nvidia, staged a strong recovery. The Nasdaq surged 2 percent, while Nvidia rebounded 8.9 percent after its sharp fall in the previous session, which had erased $593 billion from its market capitalisation. The S&P 500 posted its biggest daily gain since July 31, rising 3.6 percent.
2) Surge in Broader Markets: Mid- and small-cap stocks attracted investor interest following a recent correction. The Nifty Midcap 100 and Smallcap 100 indices saw strong buying as valuations appeared attractive, rising 2.38 percent and 3.45 percent, respectively. Inox Wind, Suzlon Energy and CG Power and Industrial Solutions were among the top gainers from the segments.
Parthiv Shah, Director at Tracom Stock Brokers Pvt Ltd, noted that after a steep correction in mid- and small-cap stocks, which had fallen almost 2-3 times the index’s decline, valuation comfort is emerging in select segments. “Much will depend on how earnings unfold from Q4 onwards, as stock prices ultimately track earnings growth,” he said.
However, he cautioned against investing in mid- and small-cap stocks where valuations remain stretched despite recent corrections, citing high inflows over the past two years that had driven multiples higher.
3) Fed Optimism: The US Federal Reserve is expected to keep its benchmark interest rate unchanged in the 4.25 - 4.50 percent range at the conclusion of its two-day policy meeting tonight at around 11:30 PM (IST).
Markets are keen to gauge how many rate cuts the Fed is considering. A few weeks ago, only one cut was expected, but now expectations have risen to two,” Vinny Bleau, director, fixed income capital markets, at Raymond James in Memphis told Reuters.
Investors are also closely watching the Fed’s commentary for indications on future monetary policy. “The market will focus more on Budget-related developments. The Fed decision is unlikely to have a significant impact as no immediate policy change is expected,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
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