Why is market rising today? Sensex jumps 500 pts, Nifty above 24,600 as Diwali fireworks continue. 4 factors driving D-St gains

The Indian stock market extended its rally this week, with Sensex and Nifty recording up to 0.8% gains on Friday even as global markets crashed as the AI frenzy fizzled out following US President Donald Trump’s defeat in the midterm elections.

Sensex jumped 500 points while Nifty gained above 24,600 on Friday. The benchmark indices have jumped up to 7% in the past five days.

Mahindra & Mahindra shares jumped more than 5% to lead gains on the Sensex, while Titan, Infosys, HCL Tech, TCS and Bharti Airtel shares were up around 2% each. Bucking the trend, Asian Paints, Bajaj Finance and Power Grid shares were down up to 2% to lead losses on the benchmark index.


While benchmark indices extended gains, broader markets crashed. Nifty Smallcap 250 index plunged nearly 1.5% while Nifty Midcap 100 index dropped more than 1% on Friday morning. As a result, the overall market breadth turned negative, with NSE seeing 2,236 declines against 937 advances, while 99 stocks remained unchanged.

Among the sectors, Nifty Metal plunged around 2% to lead losses, while Nifty IT gained 1.5% to lead gains. India VIX, which measures volatility in the market, soared nearly 8% to near 17.

Here are the key factors boosting market today:

1) Dalal Street shines amid global AI selloff

Artificial intelligence-linked stocks plunged on fears of tougher AI regulation after Democrats won ‌control of the US Congress, defeating President Donald Trump’s Republican Party in the midterm elections. Democrats’ victory sparked concerns that tighter regulation could slow the AI infrastructure buildout that has helped lift stocks to record highs this year. Nasdaq fell 6%, marking its worst drop since the infamous Covid-19 crash in March 2020. The tech-heavy index also entered a technical ‘correction’ territory, a 10% drop from ⁠its October 6 record-high close. South Korea’s Kospi, which was seen as the face of the sharp volatility around the AI frenzy, also felt the pain, crashing more than 9% to trigger circuit breaker.

This global AI rout is boosting sentiment for the Indian stock market, which is said to have what analysts call the ‘anti-AI’ advantage. Veteran banker Uday Kotak recently said that he expects India to benefit from the reverse flows as the AI frenzy fizzles out, while working down the path of building its own AI capabilities.

Also read | Infosys, Wipro, TCS and other IT stocks rise up to 3% as US AI rout deepens; is the bubble bursting?

2) Strongest FII buying in 6 years

Foreign investors intensified their purchases on Dalal Street, net buying shares worth Rs 14,975 crore on Thursday, according to provisional data on NSE. This marks their biggest single-day net purchase in nearly six years, as investors rotated out of AI-linked trades globally.

FIIs have overall remained buyers of Indian shares everyday this week so far. Their recent purchases in Dalal Street intensified this month, but an early trend was seen in the second half of the previous month when they remained net buyers of Indian equities in six out of 10 sessions. This came after a sharp selloff in the first half of October and overall September.

3) Strong earnings reactions

M&M shares were the top gainers on Sensex, as the shares of the automaker jumped more than 5% following strong Q2 earnings. Nomura reaffirmed M&M as its top pick, noting that the company has a strong launch cycle coming up in 2027. It noted that the company’s Q2 were broadly in-line with estimates. The earnings season has so far been better than estimates, boosting market.

“It is important to recognise the fact that this ongoing rally has fundamental support from impressive earnings growth which has come better-than-expected,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

Also read | Upbeat earnings bolster case for India stocks as Asia wavers

4) Value buying in large caps

The sharp rally on Dalal Street this week comes after a prolonged selloff that has rattled portfolios since the beginning of this year. Sensex and Nifty still remain sharply lower than their respective record highs. After the sharp drop, analysts have been pointing out attractive valuations in several largecap stocks, which may have been triggering value buying among investors.

“A significant factor which investors should understand is that this rally is driven by large-caps which had become attractively valued. Note that yesterday while the Sensex rallied 2.6%, the Smallcap 100 index crawled by a measly 0.67%. It is evident where money is going. For financials, tech and auto stocks there is more upside,” Vijayakumar from Geojit said.

Why caution is still warranted?

While the market is rallying, caution is still warranted as oil prices have jumped back above $100 per barrel after US President Donald Trump said he would have to decide whether the US should launch further action against Tehran or accept the current situation.

US bond yields also inched higher, while rupee declined. Additionally, the rally today is only limited to the largecaps, while midcap and smallcaps crash.

Technical view on Nifty

Nifty’s staying below 24,800 keeps the undertone subdued, said Hemang Gor, Senior Research Analyst of Derivatives and Technical Research at Axis Direct. He said the support lies at 24,300 (a break risks 24,000).

Also read | Uday Kotak says $700 bn outstanding FII payments will boost market, sees AI worries driving flows to India

Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.