Why the stock market rose today: Sensex settles 1,046 pts higher, Nifty tops 25,100; 4 key drivers of the rally

Indian benchmark indices Sensex and Nifty ended sharply higher on Friday, snapping a three-day losing streak, as a rally in financial stocks fuelled by the Reserve Bank of India’s move to ease provisioning norms for project financing, helped offset concerns over rising geopolitical tensions in the Middle East that could cap further gains.

The BSE Sensex advanced 1046.30 points, or 1.29%, to close at 82,408.17, while the NSE Nifty added 319.15 points, or 1.29%, to settle at 25,112.40.

Meanwhile, the market capitalisation of all listed companies on BSE surged by Rs 8.22 lakh crore to Rs 447.64 lakh crore.


Nifty Bank, Financial Services, Auto, and Metal were among the top-performing sectors, leading the rally. In the broader market, the Nifty Midcap and Smallcap indices also ended 1.5% and 1% higher, respectively after Thursday’s sharp decline.

Also Read: Adani Energy among 8 Nifty500 stocks that may rally over 50% in next 12 months

1. RBI Eases Norms for Project Financing

The RBI on Thursday released its final guidelines for project financing, replacing multiple legacy circulars and aligning norms across banks, NBFCs, and co-operative banks.

"In comparison with the May-2024 draft proposal of 5% standard assets provisioning for under-construction projects, the 1.0%/1.25% provisioning for Infra/CRE projects under the final regulations gives a much-needed breather to project financiers, including REC and PFC," Emkay Global's analyst Avinash Singh said.

Lower provisioning norms will reduce funding costs for infrastructure and real estate projects, benefiting lenders.

2) Fed Signals Two Rate Cuts in 2025

The US Federal Reserve kept interest rates unchanged but maintained its projection of two rate cuts in 2025. While inflation expectations have risen, the central bank’s signal of easing monetary policy in the medium term was viewed positively by global markets.

Despite expectations of slower GDP growth (1.4%) and higher inflation (3%) in the US next year, the indication of rate cuts offered some relief to equity investors.

Also Read: These 9 Nifty Microcap Index stocks trading below industry PE may rally up to 42%

3. Weakening Dollar

The US dollar index dropped to 98.57, extending a 0.34% decline. A weaker dollar generally boosts emerging market equities like India by attracting foreign capital and supporting the rupee.

In bond markets, the US 10-year Treasury yield was steady at 4.389%, while the 2-year yield slipped by 2 basis points to 3.925%.

4. Return of FII Buying

Foreign institutional investors (FIIs) have turned net buyers, purchasing equities worth Rs 1,824 crore over the last two sessions.

Meanwhile, domestic institutional investors (DIIs) continued their strong buying streak for the 12th consecutive day, investing Rs 2,566 crore—providing additional support to the market.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)