Indian Stock Markets Rally on Rate Cut Hopes, Supported by FII Buying

Mumbai, December 5: Indian stock indices staged a strong recovery on Thursday after a slow start, driven by optimism surrounding a potential rate cut in the ongoing Reserve Bank of India (RBI) Monetary Policy Committee (MPC) meeting.

The Nifty 50 index climbed 165 points, or 0.67%, to 24,628.80 points, while the BSE Sensex surged 600 points, or 0.74%, to 81,560.61 points at the time of this report.

Key Drivers of the Market Movement

1. Anticipation of RBI Rate Cut:
   Market experts attribute the rally to speculation about an interest rate cut by the RBI to support economic growth. Though the probability of a rate cut is low, any shift in the RBI's policy stance amid signs of economic weakening could trigger further market reactions.
2. Foreign Institutional Investors (FIIs) Buying:
   A significant driver of the rally has been renewed buying by foreign investors. On Wednesday alone, FIIs bought equities worth INR 1,797 crore, marking a bullish sentiment towards Indian markets.Shriram Subramanian, Founder and MD of InGovern Research Services, commented:"After a while, we are seeing FIIs buying into the Indian markets. The tone towards the year-end seems bullish, despite economic indicators pointing to a slowdown. There's an expectation of an RBI rate cut to support growth, along with increased government spending to signal economic revival."
3. Sectoral Performance:
   • Nifty IT led the rally among sectoral indices with a gain of over 1.28%.
   • Nifty Private Bank and Nifty Oil & Gas also advanced by 0.5%, signaling strength in key sectors.
   • Nifty Media, Nifty Metal, and Nifty Realty, however, remained under pressure, indicating a mixed sentiment across broader markets.

Market Gainers and Losers

• Top Gainers on NSE: Titan, Infosys, TCS, Dr. Reddy’s, and Wipro.
• Top Losers on NSE: Bajaj Auto, SBI Life, and Cipla.

Market Open and Expert Insights

The Nifty 50 opened at 24,539.15 points, gaining 71.70 points or 0.29%. Similarly, the BSE Sensex began the day at 81,182.74 points, gaining 226.41 points or 0.28%.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted:

"FIIs turning buyers is positive for markets, particularly for large caps. The strength in banking stocks has the potential to take Bank Nifty towards all-time highs, which could also lift Nifty higher."

Outlook

The ongoing FII activity and speculative optimism around the RBI's policy decisions could sustain bullish sentiment in the short term. However, market participants remain cautious, watching closely for announcements from the MPC meeting and signals from the global economic landscape.

While IT and banking stocks show strong momentum, broader market trends depend on sustained foreign inflows and clarity on fiscal and monetary measures.