Smart market rally! Sensex surges over 600 points, Nifty above 19,600; here’s why Dalal Street is partying

Sensex & Nifty Diwali party continues! The Indian stock market witnessed a significant rally on Wednesday, with the Sensex crossing the 65,500 mark (up over 600 points) and the Nifty surpassing 19,600. This surge was fueled by the global equity rally, triggered by softer-than-expected US inflation data. The rally in smaller stocks, driven by retail investors, showed no signs of slowing down, with the Nifty Smallcap50 outperforming with a 1.5% jump, according to an ET report.
As a result, investors gained approximately Rs 2.8 lakh crore in wealth, pushing the total market capitalization of all BSE-listed stocks to Rs 324.9 lakh crore.Market participants are optimistic that the momentum in large-cap stocks will soon return, propelling the Nifty beyond the 20,000 mark.
According to Sanjiv Bhasin of IIFL Securities, “Today is a perfect occasion to catch the bears on the wrong side. I would say that this is just the start. I told you 19,700 is coming within a few days of Diwali. Now you write it down, 20,000 is here by the end of this month.”
Here are the key factors that contributed to the post-Diwali rally on Dalal Street, as listed in the report:
1) US inflation data: The softer-than-expected October US inflation data, with inflation at 3.2%, has raised hopes that the US Federal Reserve could be nearing the end of its rate hike cycle. Dr V K Vijayakumar of Geojit Financial Services believes that the mere 0.2% month-on-month increase in core inflation is highly positive. He suggests that the takeaway from these numbers is that the Fed is done with rate hikes and the timeline for rate cuts in 2024 is likely to be advanced.
2) Global markets: The US inflation data has triggered a global rally in riskier assets. The S&P 500 and Nasdaq posted their largest daily percentage gains since April 27, with increases of 1.91% and 2.37% respectively. Asian markets also displayed a positive bias, with Japan’s Nikkei 225 up 2.55% and Hong Kong’s Hang Seng surging over 3%.
3) Fall in bond yields: The probability of a rate cut by the US Fed in March has risen to 31%, causing the 10-year US bond yield to drop nearly 20 basis points on Tuesday. It now stands at 4.42%, the lowest level since September 22.

4) FII vs DII: While Foreign Institutional Investors (FIIs) have been selling Indian stocks since September, the intensity of selling has significantly reduced in November. Market insiders anticipate dollar inflows as the sustained performance of the Indian market may be triggering a fear of missing out (FOMO) among overseas investors. On the other hand, Domestic Institutional Investors (DIIs) have been continuously buying, providing support to the indices.
5) IT stocks: The rally witnessed today was primarily led by the strong performance of IT stocks. Tech Mahindra and Mphasis saw a 4-5% increase, contributing to a 2% jump in Nifty IT. Heavyweights Infosys and TCS also rallied around 1.5-2% each.
6) Technical factors: Monday’s session saw the Nifty closing above its Volume-Weighted Average Price (VWAP) for the first time in the last five days. According to Anand James, Chief Market Strategist at Geojit Financial Services, this encourages confidence in the trajectory towards 19,840, which has been anticipated since last week. He suggests that the turnaround points will remain at 19,433/19,370 until the 19,840 level is cleared.