Sensex up 500 pts, Nifty above 24,400: Rupee rally, other key factors behind market rise

Sensex, Nifty trade higher on May 2 on a rally in Indian rupee and trade talks between United States and China.

The benchmark equity indices surged nearly 1 percent on Friday as a stronger rupee, sustained foreign inflows and global cues lifted the domestic market sentiment before profit booking capped the gains.

The Sensex jumped 917.17 points or 1.14 percent to touch an intraday high of 81,159.41. The broader Nifty also advanced 254.95 points or 1.04 percent to reach a high of 24,589.15.  However, the benchmarks later pared the gains as Sensex was trading nearly 450 points higher and Nifty was trading above 24,400.

At 11:06 am, the Sensex was up 439.51 points or 0.55 percent at 80,681.75, and the Nifty was up 91.10 points or 0.37 percent at 24,425.30. About 1996 shares advanced, 1199 shares declined, and 135 shares unchanged.

Adani Ports and Special Economic Zone, Maruti Suzuki India, Hindalco Industries, ETERNAL, IndusInd Bank were among the top gainers in the Nifty pack today, rising up to 5 percent.

Here are the main factors that supported Friday’s market rally:

1) Rupee Strengthens: The Indian rupee appreciated significantly, breaching the 84-per-dollar mark for the first time since October 1, 2024. It opened 40 paise stronger at 84.09 and later strengthened to 83.90 against the US dollar, compared to the previous close of 84.49.

Currency traders attributed the rally to strong capital inflows into both equities and debt markets. Positive developments in India-US tariff discussions also supported the local unit.

Rupee extends gains, below 84/$ for the first time since October 2024

2) US-China Trade Talk Hopes: China indicated that it may be open to resuming trade talks with the United States. China’s Commerce Ministry said it had received signals from Washington seeking dialogue, raising hopes of easing tensions between the world’s two largest economies, according to Bloomberg.

"The US has recently sent messages to China through relevant parties, hoping to start talks," the Chinese ministry said, adding that Beijing is evaluating the possibility.

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3) Sustained FII Buying: Foreign institutional investors (FIIs) continued to pump money into Indian markets, buying equities worth Rs 50.57 crore on Wednesday. This marked the eleventh consecutive session of net buying by overseas investors.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, "The surprising resilience of the market has been primarily driven by sustained FII buying, totalling Rs 37,375 crore in the last eleven sessions. A weaker dollar, softening crude prices, declining interest rates in India and early signs of recovery in demand are all aiding the rally."

4) Robust GST Collections: Goods and Services Tax (GST) collection rose 12.6 percent Y-o-Y to an all-time high of about Rs 2.37 lakh crore in April, which the government said shows the resilience of the Indian economy and the effectiveness of cooperative federalism. The record GST collection also provided a positive backdrop, pointing to strong consumption trends.

5) Optimism over India-US trade deal: Hopes of early India-US trade deal also bolstered sentiment further. US President Donald Trump said that tariff talks with India were "going great" and suggested there was a possibility the two nations could reach a deal. "Talks with India on tariffs were coming along great, and he thinks the two countries will reach a deal," Trump was quoted as saying by Reuters.

"The high probability of India among the five ‘allies’ of the US entering into early trade deals with the US is a significant positive factor," said VK Vijayakumar.

"At the current juncture of high valuations (Nifty trading at above 20 times estimated FY 26 earnings) and high India-Pak tensions, the near-term risk-reward is not in favour of high reward. Therefore, investors can play it safe by increasing the cash component in the portfolio even while remaining invested," he added.

Trump optimistic about trade deal with India, says tariff talks 'going great'

6) Positive global cues: In Asian markets, South Korea's Kospi index, Tokyo's Nikkei 225 and Hong Kong's Hang Seng were trading in the positive territory while Shanghai SSE Composite index quoted marginally lower. US markets ended in the positive zone on Thursday.

7) Drop in Crude: The global oil benchmark Brent crude dropped to USD 62.56 a barrel. "Domestically, the market sentiment remains upbeat due to continued FII buying, strong quarterly earnings, record high GST collection during the month of April, and a drop in oil prices to a three-month low of USD 61 per barrel," Vikas Jain, Head of Research at Reliance Securities, said.

What Technical Analysts Said?

Anand James, Chief Market Strategist at Geojit Investments noted that a persistent inability to close above 24359, is a warning sign, but bargain hunters appear equally eager as is evident from the long lower wick on majority of the last six days.

"While standard deviation studies point to extension of uptrend beyond 25000, oscillators have been softening, signaling lack of strength, prompting us to keep the downside marker in the 24190-119 region. The support levels identified below are 24070-23950, and then 23670," he added.

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