New high for the Nifty 50 and Sensex, reaching levels of 21,000 and 70,000: Top factors driving this rally

The Indian stock market has been in a bull market since December 2023, and the benchmark indices, Nifty 50, BSE Sensex, and Bank Nifty, have all been rising steadily to new heights.

Indeed, today saw a new high for the Nifty 50 and Sensex, reaching levels of 21,000 and 70,000, respectively. In the recent six sessions, the BSE Sensex has risen from 67,481 to 70,057 levels, recording a surge of more than 2,500 points during this period.

Stock market experts claim that the Sensex reached a new all-time high of 70,057 today due to market expectations of a rate drop at the upcoming US Federal Reserve meeting, which has made international institutional investors extremely enthusiastic about Indian markets.

They stated that FIIs think that the US Fed's decision to decrease rates could cause the US dollar to weaken in the near future. 

Let’s decode the factors driving the current bullish Indian stock market 

1. US Fed rate cut buzz

Avinash Gorakshkar, Head of Research at Profitmart Securities, discussed the market excitement surrounding the coming US Fed meeting and stated that the Indian stock market is reaching new heights due to the US Fed rate cut buzz. 

It is certain that the high interest rate regime has peaked and that there won't be any rate hikes anytime soon in light of the most recent US Federal Reserve minutes. All things considered, the market is assuming a rate pause with a dovish stance at the next US Federal Reserve meeting.

2.  FII’s  Active participation in Indian Equity market

When asked why FIIs are pumping money into the Indian stock market, Saurabh Jain, Vice President of Research at SMC Global Securities, stated that FIIs are actively purchasing in the Indian equity market's cash segment.

By Friday last week, FIIs had purchased Indian shares worth Rs 10,875 crore in cash in December 2023. They are purchasing actively since the Indian National Rupee (INR) has fallen in value in recent months. Because FIIs pay in dollars, the rupee's depreciation allows them to purchase more shares.

3. Government Initiatives to pay for oil imports in rupees

The Indian government is pushing hard for its oil imports to be paid in rupees. It has made several deals in the Middle East and is attempting to make more deals with other countries. This is projected to strengthen the Indian rupee against foreign currencies, particularly the US dollar, in the short term.

This is assisting the Indian economy in keeping inflation within its limits, and the current RBI MPC meeting conclusion is a clear example of this, according to Avinash Gorakshkar.

4. BJP ‘s recent Victory in elections

Following the BJP's victory in three major states in the recently concluded assembly elections, the market expects the Modi government to have an advantage in the upcoming Lok Sabha elections in 2024.

According to Avinash Gorakshkar of Profitmart Securities, they feel the same governance guarantees continuation of government programs and some investing based on this short-term political buzz.

Also read: BJP’s victory in three state elections caused the BSE Sensex to rise by 1383.93 points

5. US Economy appeared to be strong

Following better-than-anticipated US job figures, the US dollar is projected to fall. According to Saurabh Jain of SMC Global Securities, this would relieve pressure on the US Fed and allow them to breathe a sigh of relief in their efforts to keep inflation under control.

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