Sensex, Nifty jump 1% today after steep 5-day fall; global cues among key factors behind markets bouncing back

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26 Aug, 2025 12:21

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Sensex and Nifty staged a strong recovery on Monday, rebounding sharply after a steep 5 percent fall over five days of the last week. The rally was driven by slight moderation in the US inflation data, and positive global cues with robust gains in the US and Asian markets. Blue-chip stocks witnessed heavy buying, contributing significantly to the market's resurgence.

At noon, the BSE Sensex was up about 0.9 percent at 78,690, while the NSE Nifty advanced was up about 215 points at above 23,800. Both benchmark indices jumped as much as 1.1 percent intraday.

Here are the key factors driving the sharp recovery in equity markets today:

1. Cooling US inflation data: The US Commerce Department reported that the November CPI inflation was at a modest 0.1 percent over October prices. Core inflation, excluding food and energy, also increased by just 0.1 percent, down from the sharper 0.3 percent gains in the previous two months. The data signals a significant cooling in price pressures, shortly after Federal Reserve Chair Jerome Powell indicated only two key interest rate cuts in 2025, down from four projected earlier.

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2. Technical support for Nifty: Market analysts said technical factors were supporting a recovery in the Nifty index. Anand James, Chief Market Strategist at Geojit Financial Services, said that the Nifty is poised for a pullback above its 200-day Simple Moving Average (SMA), currently at 23,837. "If relief rallies gather momentum, the index could test 24,165 levels. However, failure to sustain above 23,700 may signal weakness, although the November 21 low of 23,265 is likely to hold firm this week," he added.

3. Positive global cues: Asian markets traded higher with strong rise in indices in Seoul, Tokyo, Shanghai, and Hong Kong on Monday. Meanwhile, US indices—S&P 500, Dow Jones, and Nasdaq—recorded gains of over 1 percent on Friday. "This bounce-back in India's benchmark indexes was expected after the sharp drop last week and there isn't much to read into this," said Raghvendra Nath, managing director at Ladderup Wealth Management.

4. Metals shine on safeguard duty hopes: Shares of metal companies, particularly steelmakers, surged after the Directorate General of Trade Remedies (DGTR) initiated an investigation into the steel industry’s request for a 25 percent safeguard duty on imports. Stocks of major steelmakers rose by 1-2 percent in early trade, propelling the Nifty Metal index to gain over 1 percent.

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5. US Government shutdown averted: Investor optimism was bolstered globally after the US Congress passed spending legislation on Saturday, averting a government shutdown. The development eased concerns over potential disruptions, lifting market sentiment worldwide.

Analysts, however, warned that a sustained market rebound is possible only when we have indications of a growth revival in the economy. Ajit Mishra, Senior Vice President - Research, Religare Broking said participants will closely monitor FII flow trends and global market performance for direction. Additionally, the scheduled expiry of December’s derivative contracts may amplify volatility.

In the past five days, the BSE benchmark tanked 4,091.53 points or 4.98 per cent, and the Nifty slumped 1,180.8 points or 4.76 per cent.

Nifty is witnessing a relief rally today after last week's sell-off, but caution still lingers with FIIs selling, Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 3,597.82 crore on Friday, according to exchange data.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.