On Thursday, the Indian stock market was bullish. Sensex and Nifty rose up to 0.8% on Federal Reserve keeping interest rates unchanged and other factors boosting investor confidence. However, volatility can be seen in the market on the day of expiry. The Sensex surged over 600 points to close at 73,860, while the Nifty 50 gained 175 points to close at 22,875. The broader market also saw gains, with the Nifty Smallcap 100 and Nifty Midcap 100 registering gains of up to 0.6%.

The biggest gainer in the Sensex was shares of Adani Ports, which gained more than 4%. Apart from this, shares of Power Grid, Kotak Mahindra Bank, HUL, NTPC, ITC, Reliance Industries, Titan, TCS and Infosys rose by 1-3%. As for the sectoral indices, Nifty FMCG rose around 2%, while Nifty PSU Bank, Nifty IT and some other indices registered gains of up to 1%. At the same time, the Nifty Auto witnessed a decline. Overall market trend was positive. On the NSE, 1,995 shares advanced, while 1,228 shares declined. Apart from this there was no change in the price of 105 shares. Let us also tell you what are the 6 main reasons for the rise in the stock market.

Due to this reason, the stock market boomed

1. The Fed keeps interest rates steady: Even as inflation remains high, the Federal Reserve has kept its key interest rate steady at around 3.75 to 4 percent. Fed Chairman Kevin Wersh has signaled that his policies are starting to have an effect. The decision comes after interest rates were hiked by 0.25% (a quarter percent) last month, the first time in three years. Warsh did not elaborate on what the Fed would do next, but most economists believe the central bank could raise the key interest rate again by 0.25% at its next meeting on December 8-9. According to CME Fedwatch, Wall Street investors now see growth potential at about 85%.
2. Expectations of LTCG tax cut rise: Expectations of long-term capital gains tax (LTCG) changes are rising behind the rally in the Indian stock market. Recently, Finance Minister Nirmala Sitharaman said that long-term capital gains tax (LTCG) and Securities Transaction Tax (STT) are under discussion, raising expectations of these changes.
3. FII Purchase: According to NSE’s preliminary data, foreign investors (FIIs) on Wednesday bought Indian stocks at around Rs. 872 crore net purchase. Earlier, the market was jittery due to heavy selling, followed by sporadic buying by FIIs in Indian stocks recently. FIIs on Tuesday invested Rs. 4,198 crore and on Friday Rs. 2,098 crore worth of Indian shares were bought. However, analysts believe that no clear trend reversal has been seen yet.
4. Rupee strengthened: The US dollar softened slightly after the US Federal Reserve’s policy announcement, due to which the Indian rupee strengthened by 11 paise to 95.17. In the interbank foreign exchange market, the rupee opened at 95.20 and then strengthened to 95.17 levels. In this way, an increase of 11 paise was recorded compared to the previous closing price.
5. Softening in bond yields: The bond yield on the benchmark 10-year US Treasury note has fallen below the important psychological level of 5%. The yield on 30-year bonds fell to 5.3%, while the yield on 2-year notes — which fluctuate with expectations of the Fed’s interest rate decisions — fell to 4.69%. A fall in bond yields makes the debt market less attractive than the equity market, which generally benefits the equity market.
6. Attractive assessment: Although the market is recovering some of its losses, Sensex and Nifty are at very low levels this year. After the heavy sell-off, analysts have identified some areas where valuations have come to attractive levels. Kotak Institutional Equities said in its latest strategy report that we are seeing value in many segments of the market, as valuations across sectors and stocks have declined significantly. Market multiples are at reasonable levels, although our focus remains less on ‘top-down’ index valuation.

Still need to be careful

VK Vijayakumar, chief investment strategist at Geojit Investments, said in a media report that keeping interest rates steady as expected by the Federal Reserve is a positive for equity markets globally. However, he said challenges remain from India’s perspective. 10-year US bond yields remain around 5% and crude oil prices show no signs of slowing. There are reports that chip shortages will continue into 2030, fueling renewed interest in chip stocks and AI-related stocks in South Korea and Taiwan. Analysts said this means foreign investors will continue to invest money in AI and related stocks, ignoring India.

He further said that now there is a growing hope of relief in LTCG (Long Term Capital Gains) tax in the next budget. It seems that it is no longer just a matter of option. Such a huge capital inflow ($31 billion by 2026) is impacting India’s macro-economic figures. Prolonged high crude oil prices will widen the trade deficit and current account deficit, leading to a depreciation of the rupee and an increase in imported inflation. This will worsen the already high level of inflation, which may increase further due to severe monsoon shortage this year.