Sensex surges 965 points, Nifty closes above 24,300: 4 key reasons behind the rally

Indian benchmark indices staged a strong comeback on Friday, with the Sensex surging 965 points and the Nifty closing comfortably above the 24,300 mark. The rally was broad-based, driven by a combination of global and domestic factors that brought relief to Dalal Street after recent volatility.

The BSE Sensex ended the session at 79,802, while the Nifty50 closed at 24,323, marking one of the best single-day gains in recent weeks. Market breadth was positive, with advances outpacing declines across sectors.

Global markets provide tailwind

The rally was triggered by a sharp upswing in global equities. US markets closed higher overnight, and Asian peers traded in the green on Friday, calming investor nerves.

A softer-than-expected US inflation reading earlier this week boosted hopes that the Federal Reserve may ease its monetary tightening cycle sooner than anticipated. This optimism spilled over into Indian markets, with foreign portfolio investors turning net buyers in early trade.

Broad-based buying across sectors

All major sectoral indices ended in positive territory. Banking and financial stocks led the charge, with the Nifty Bank index surging over 2%. Heavyweights such as HDFC Bank, ICICI Bank, and SBI contributed significantly to the index gains.

IT stocks also found favour, as a weak US dollar and stable interest rate outlook buoyed the export-driven sector. Reliance Industries and other index majors added to the momentum, lifting overall sentiment.

Domestic macro data supports sentiment

Investors drew comfort from the government's latest economic data, which showed industrial production and manufacturing activity remaining resilient. The robust GST collection numbers for June also reinforced the narrative of steady economic recovery.

The rupee stabilised against the US dollar during the session, further reassuring foreign investors. Analysts pointed out that domestic institutional investors continued to pump money into equities, providing a floor to the market.

Short covering and technical bounce

Traders noted that the market had been oversold after the recent correction, making it ripe for a technical rebound. Short sellers, caught off guard by the positive opening, were forced to cover positions, amplifying the upward move.

The Nifty reclaimed its key moving averages on the daily chart, signalling a possible change in trend. Option data suggested that the 24,300-24,400 zone was acting as a strong resistance, but the index managed to close above it, indicating bullish momentum.

While Friday's rally has brought some cheer, analysts caution that the market remains vulnerable to global headwinds. The next few sessions will be crucial to determine if the upmove has legs or is merely a dead cat bounce.