India’s equity market recorded its best weekly performance in years, with benchmark indices—the BSE Sensex and NSE Nifty—each climbing over 4%. This surge comes after months of decline and is driven by a combination of factors, including the return of foreign institutional investors (FIIs), value buying at lower levels, and a dovish stance from the US Federal Reserve.
The resurgence in market sentiment was fueled by the comeback of FIIs amid a strengthening Indian rupee. Additionally, the steep correction in many stocks over recent months created opportunities for value buying, attracting investors looking to capitalise on lower valuations.
Globally, the US Federal Reserve’s indication of potential future rate cuts has also played a key role in lifting market sentiment. The dovish stance has eased concerns about aggressive monetary tightening, creating a favourable environment for equities worldwide, including in India.
The Nifty gained over 4% this week, the highest weekly since February 2021. The Sensex also surged 4%, the most since July 2022. In the broader market, Nifty midcap and Nifty smallcap soared 7.7% and 8.6%, respectively, this week to register their biggest weekly gains in about five years.
On Friday, the BSE Sensex settled at 76,906 - up 557 points – while the NSE Nifty 50 ended with a gain of 160 points at 23,350.
"Investors shrugged off negative global markets sentiment as the FIIs making a steady comeback to local equities this week coupled with a sharp drop in the domestic currency level provided a major fillip," said Prashanth Tapse, senior vice president of research at Mehta Equities, said. FIIs, who have selling relentlessly since late September, have been net buyers in recent sessions. On Friday, FII net purchase stood at Rs 7,470 crore.
The local currency -rupee - logged its best week in more than two years. The rupee appreciated by 40 paise to 85.97 against the US dollar—a two-and-a-half-month high—driven by a weakening dollar, strong foreign capital inflows, and the buoyant equity market.
Vinod Nair, Head of Research at Geojit Financial Services said that the anticipated reduction in risk-free rates, coupled with the correction in the dollar index, are facilitating fund flows back to emerging markets.
“Despite global uncertainty from escalating trade tensions, improving domestic macroeconomic indicators, valuation corrections, and anticipated earnings growth are encouraging investors to seek bargains,” added Nair.
Going forward, investors will keep an eye on the Reserve Bank of India's policy decision on April 5, when the central bank is widely expected to slash rates again amid slowing growth and below-target inflation.
All sectoral indices on the NSE closed in the green this week, with Nifty Realty gaining nearly 8%, followed by Nifty Media’s 7.6% gain and Nifty Healthcare’s 7.1%.
Aditya Gaggar, Director of Progressive Shares cautioned that as almost all sectors have witnessed breakouts from different patterns and had a sharp rally throughout the week, many of them and their components are in the overbought territory. “Thereby, a short-term pullback or consolidation remains a possible scenario,” added Gaggar.