Sensex soars 300 pts, Nifty above 23,400: Above-average monsoon forecast, other key factors behind market rise today

1) Financials lead the charge: Banking stocks saw heavy buying, pushing the Nifty Bank index higher for the third straight session. Analysts said softer inflation data has raised expectations of a rate cut by the Reserve Bank of India (RBI), which in turn buoyed financial stocks.

"Headline and core inflation continue to ease, and with CPI now at a 67-month low of 3.34 percent, the chances of a rate cut have increased," said Mahendra Patil, founder and managing partner at MP Financial Advisory Services LLP.

Echoing similar views, Vinod Nair, Head of Research at Geojit Financial Services, said: "The Indian market exhibited a mild positive sentiment in anticipation that the trade fight between the US & China will not harm but benefit India, and March's CPI inflation which is at a 5-year low is indicative of further rate cuts in the near future.”

2) FII inflows: Foreign institutional investors made net purchases worth Rs 6,065 crore on Tuesday, marking their biggest single-day buying since March 27, when they had pumped in Rs 11,111.25 crore.

3) Normal monsoon forecast adds cheer: The India Meteorological Department’s forecast of above-average rainfall for the upcoming southwest monsoon further lifted sentiment, especially for sectors such as FMCG, rural demand-focused firms and agriculture-related businesses.

4) Rising rupee: The rupee stayed firm and appreciated 26 paise to 85.54 against the US dollar on Wednesday on the back of a massive inflow of foreign capital, a weak American currency and lower crude oil prices. PTI quoted the forex traders saying the positive macroeconomic numbers that came on the heels of the 90-day reprieve from US reciprocal tariffs fuelled buying in domestic equities by foreign investors, adding strength to the local currency.

5) Domestic retail inflation at a five-year low: Retail inflation dipped marginally to a nearly six-year low of 3.34 percent in March due to decline in prices of vegetables, eggs and protein-rich items. This raised hope for a third rate cut by the RBI.

Ajit Mishra – SVP, Research, Religare Broking Ltd., noted "Participants responded positively to favorable cues, including the update on a normal monsoon, further easing of retail inflation, and, importantly, the absence of any negative surprises from global markets. Notably, the sustained strength in banking and financial stocks, along with rotational buying in other sectoral heavyweights, played a significant role in driving the momentum."

Technical outlook

From a technical standpoint, the Nifty closing above its 100-day exponential moving average (EMA) for the second session in a row indicates continued strength.

“The index found support at 23,300 and moved higher. As long as it stays above this level, sentiment is likely to remain firm,” said Rupak De, Senior Technical Analyst at LKP Securities. He added that resistance is now seen near 23,650, while a break below 23,300 may trigger a slide towards 23,150 or even 23,000.

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