Benchmark stock market indices are once again nearing their record highs after surging over 1 per cent on Wednesday after losses in previous three sessions.
The BSE Sensex galloped 1,022 points to close at 85,609.51 levels and the NSE Nifty 50 index accelerated 320 points to end the day at 26,205.30. The midcap and smallcap indices also surged over 1.2 per cent.
The Sensex had touched an all-time on September 27, 2024 at 85,978.25. The Nifty had touched 26,246.65 last week.
Major global market indices like the FTSE 100 in London, the Hang Seng in Hong Kong, Japan's Nikkei 225 were also in the green on Wednesday.
What's driving the renewed euphoria among equity investors?
"The rally was driven by growing confidence in potential rate cuts from both the US Federal Reserve and the RBI in the upcoming December monetary policy committee meeting," said Siddhartha Khemka, head of research, wealth management, Motilal Oswal Financial Services.
All sectors ended on a positive note, with the rate-sensitive segments like real estate and automobiles gaining momentum.
Additionally, Khemka pointed, hopes around a potential Russia and Ukraine peace talk have softened crude oil prices to below $62, a one-month low, benefiting the oil marketing companies along with paint, cement and airlines.
Beyond the near-term catalysts, market experts feel, India is entering a long-awaited earnings upgrade cycle, which should aid market momentum.
Consumer facing sectors like FMCG, retail and automobiles have seen good traction after the rationalisation of Goods and Services Tax (GST) and with the wedding season now underway, sales should get further lift.
"After five consecutive quarters of downward revisions, Nifty earnings have finally reversed course, showing upgrades of 0.7 per cent, 0.9 per cent and 1.3 per cent for FY2026, FY2027 and FY2028 respectively. This marks a significant shift in sentiment and establishes early but clear signals of a broad-based revival in corporate profitability," said Amnish Aggarwal, head of research at PL Capital.
In its base case, PL Capital sees the Nifty scaling 29,000 in 12 months, while it could touch 30,548 in case of a bull run.
According, to Aggarwal, the broker remains overweight on banks, healthcare, consumer, auto and defence, while it is underweight on IT services and commodities.
"We believe economic momentum will be led by domestic demand from income tax rate cuts, 100bps rate cut, normal monsoons, 12-year low inflation and GST rates rationalisation. We note that segments like auto, electronics and discretionary consumption are showing accelerated sales growth in festival season," he said.
The Reserve Bank of India is widely anticipated to announce a 25 bps repo rate cut in December, supported by moderating inflation and a dovish stance, according to Vinod Nair, head of research at Geojit Investments. Furthermore, increasing optimism surrounding a potential truce between Russia and Ukraine is enhancing risk appetite, fostering a positive outlook for the upcoming year, he pointed out.