Sensex Nifty Rally: On Dhanteras, the Indian stock market saw a huge surge. The Sensex rose 1718.01 points (2.16 per cent) to close at 81,028.02 on bumper buying by foreign investors, while the Nifty also gained 493.75 points (2.01 per cent) to cross 25,030.35. Stock markets from America to Asia are witnessing heavy sell-off ahead of Diwali festival, Dalal Street is brimming with investor happiness. Breaking the doldrums of the last several months, the major indices picked up such pace that the market was green all around. However, this increase was limited to large companies i.e. large cap stocks, while selling pressure was evident in smaller stocks.
How the Global AI Crisis Became a Boon for India
The biggest reason for the fall in markets around the world is the stampede in artificial intelligence (AI) related stocks. Democrats have taken control of Congress after defeating President Donald Trump’s Republican Party in the US midterm elections. The political shift has raised fears that stricter regulations will now be imposed on the AI sector, which could curb massive spending on data centers. Because of this panic, the American index Nasdaq fell almost 6 percent, the biggest drop since the corona crash of March 2020. The shock sent the Nasdaq into a correction zone, down 10 percent from its record high on Oct. 6, while S&P 500 companies wiped out about $3 trillion. Shares of Nvidia fell 9.3 percent, while South Korea’s Kospi fell more than 9 percent to below 5,000. Japan’s Nikkei also fell about 7 percent.
While the world fears this decline, India is directly benefiting from being an ‘anti-AI’ market. According to veteran banker Uday Kotak, global companies chased AI and took huge loans, making their shares more expensive than they needed to be. Now that the wind is blowing from there, foreign money is flowing back to India.
Foreign investors break 6-year record
Foreign Institutional Investors (FIIs), who had been steadily withdrawing money from the Indian market from September to the first fortnight of October, are now in a full buying mood. According to preliminary data from the National Stock Exchange, foreign investors on Thursday poured in a single day Rs. 14,975 crore worth of shares were purchased. This is its biggest single-day purchase in the last six years. In just 5 trading sessions, foreign investors have invested nearly $5 billion in the Indian market, while net inflows have touched $4 billion in the last 10 sessions. In the second half of October as well, it was heavily bought in 6 out of 10 sessions.
There is euphoria in large stocks but pessimism in small stocks.
The market rally was led by Mahindra & Mahindra, whose shares jumped more than 5 percent after strong second-quarter results. Brokerage firm Nomura has it as its top pick given the strong launch cycle of 2027. Apart from this, shares of Titan, Infosys, HCL Tech, TCS and Bharti Airtel gained around 2 percent. Talking about sectors, Nifty IT rose 1.5 percent, while Nifty Metals declined 2 percent. While shares of Asian Paints, Bajaj Finance and Power Grid closed down 2 percent.
While there was buying in large companies, midcap and smallcap stocks saw a steep decline. The Nifty Smallcap 250 index was down around 1.5 percent, while the Nifty Midcap 100 was down over 1 percent. A total of 2,236 stocks closed in the red on the NSE, while only 937 stocks advanced and 99 stocks closed unchanged.
Beware of these risks based on strong results
According to Kotak Institutional Equities, net profit of the Nifty 50 companies that have declared results so far grew 19 percent year-on-year, better than estimates by 4 percent. Shahzad Madan, MD, TCG AMC, says that after the sluggish performance of the last two years, Indian stock prices are now at the right level and the worst phase on the economic front is behind us. At the same time, Nomura believes that after the US election, Iran’s attitude may soften to talks, which could lead the US Federal Reserve to stop raising interest rates if oil prices fall.
However, in the midst of this excitement, there are still some dangers looming. Crude oil has once again crossed the $100 per barrel mark after US President Donald Trump’s statement on possible action against Tehran. India’s VIX rose nearly 8 percent to 17 on rising US bond yields, a fall in the rupee and market volatility, indicating that investors have to be cautious even in this surge.
