Sensex settles 400 pts higher, Nifty ends above 25,850: Six key reasons behind markets snapping three-day losses

Kotak Mahindra, HDFC Bank among other Bank Nifty shares rise. 

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26 Aug, 2025 12:21

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The equity benchmark indices settled higher amid buying in IT, metal, auto, banking and financials on Thursday, snapping a three-day decline in a highly volatile session on the weekly derivatives expiry of Sensex. A rate cut by the US Federal Reserve also boosted the sentiment.

The Sensex rose 426.86 points or 0.51 percent to settle at 84,818.13. It touched an intra-day high of 84,906.93 and a low of 84,150.19.

The Nifty advanced 140.55 points or 0.55 percent to finish at 25,898.55. After early volatility, the index moved higher through the session and ended near the day’s peak of 25,922.80.

ETERNAL, Kotak Mahindra Bank and Jio Financial Services were among the top gainers in the Nifty50 pack, rising up to 2 percent, while Trent and Bharti Airtel declined up to 1 percent. Market breadth turned positive as about 1869 shares advanced, 1575 shares declined and 158 shares unchanged.

Key factors behind the recovery

1) Value buying: Buying interest returned in sectors such as IT, auto, metal, realty, banking and financial services after recent losses. Metal stocks gained up to 1 percent, tracking firmer global prices on a weaker US dollar, which makes commodities cheaper for overseas buyers. IT shares were up around 0.3 percent after Fed rate cut. Strong buying was also seen in Bank Nifty was up 0.7 percent.

Ajit Mishra – SVP, Research, Religare Broking Ltd said buying across IT, auto, metals, realty and banking helped offset recent weakness, supported by a decline in India VIX. Steady domestic sentiment was reinforced by robust equity inflows of Rs 29,894 crore in November. However, continued weakness in the rupee capped the momentum he added.

2) Trade deal hopes: The investor mood improved after India’s chief economic advisor V. Anantha Nageswaran said most of the trade issues between New Delhi and Washington have been “sorted out”. The top economist, in an interview with Bloomberg TV, said he has full confidence that an agreement will be reached by March 2026.

Earlier, the US Trade Representative Jamieson Greer told lawmakers that India has made “the best we’ve ever received as a country” in ongoing discussions, IANS reported.

CEA Nageswaran says most trade issues between India, US 'sorted out'

3) US Fed rate cut: The US Federal Reserve on Wednesday reduced its benchmark interest rate by 25 basis points, the lowest level in more than three years. Lower US rates generally support flows into emerging markets, including India, and tend to improve business spending outlooks for sectors like IT.

Vinod Nair, Head of Research at Geojit Investments, noted "Domestic markets rebounded broadly following the Fed’s expected 25-bps rate cut amid high U.S. inflation."

4) Volatility index eases: India VIX declined nearly 2 percent to 10.74. A softer VIX generally indicates reduced near-term market uncertainty, offering some support to sentiment.

5) Global cues: US equities closed higher overnight after the Fed’s rate cut, providing positive cues for domestic investors.

6) Expiry-related volatility: The session coincided with the weekly expiry of Sensex derivatives, a period that typically sees sharp intraday swings as traders unwind or roll over positions.

Technical view

Rupak De, Senior Technical Analyst at LKP Securities, noted "Nifty remained firm after an initial decline in the early trading hour. On the downside, it slipped below the previous day's low, while on the upside it faced resistance at the 21EMA on the daily timeframe. This reflects an underlying bearish market structure, where the index struggles to move above resistance but easily breaches support levels. In the short term, 25,700 is likely to act as support. A decisive break below 25,700 could give bears the upper hand. Conversely, unless Nifty moves above 26,000, caution and fear may continue to dominate market sentiment."