Investors richer by Rs 29 lakh crore as Sensex, Nifty rise over 8%; FIIs pour in money, but will rally last?
Indian equity markets recorded their sharpest single-day rise in seven months on Thursday, supported by a decline in oil prices following the Democrats’ sweeping victory in the US midterm elections. A global rotation away from artificial intelligence (AI)-related trades also lifted expectations of stronger foreign investment inflows.Both indices have gained more than 8% over six consecutive trading sessions, which is their longest winning streak in a year. Investors have become richer by around Rs 29 lakh crore as per the market capitalisation data.The BSE Sensex surged nearly 2,009 points and the NSE Nifty climbed 576 points on Thursday. Broad-based buying across sectors pushed the benchmark Nifty 50 to a three-month high. The index had last traded above the 24,550 mark on August 7, when it stood at 24,570.65.The 30-share BSE Sensex closed at 79,310.01, gaining 2,008.61 points, or 2.60%. The NSE Nifty advanced 576 points, equivalent to 2.40%, to finish the session at 24,536.60.The latest rally has extended the market’s winning streak to six consecutive sessions. During this period, the Sensex has gained 6,063.98 points, or 8.27%, while the Nifty has advanced 1,837.75 points, which is an increase of 8%.Despite the recent recovery, the Nifty50 and Sensex remain down 6.1% and 6.9%, respectively, in 2026.Foreign investors have pulled out a record $29 billion from Indian equities, putting pressure on the rupee and prompting calls for tax concessions on equity investments.But the ongoing rally has raised expectations that Indian stocks could begin recovering from their underperformance against global markets this year. Is it sustainable? Let’s take a look at what’s driving the surge and what market experts have to say about its sustainability:
Return of FIIs & more: What’s driving the rally?
Several factors are working to drive the current rally, the most important one being expectations of relief on long term capital gains (LTCG) tax for investors.SEBI has urged the government to consider removing LTCG tax for foreign investors, while in a recent report SBI Research has said it should be abolished for all classes of investors.Finance minister Nirmala Sitharaman has indicated that the government is open to hearing views on the issue.This has brought back foreign investors on Dalal Street in full flow.Foreign investors returned to Indian stocks in a significant way on Wednesday, purchasing shares worth Rs 72.84 billion ($769.65 million). Provisional exchange data showed this was their largest single-day investment in the Indian market since October 2025.According to the latest data, FIIs have been net buyers of Indian shares worth Rs 39,404 crore over 13 trading sessions since October 16. The renewed buying follows a record sell-off that had taken foreign ownership of Indian stocks to historic lows.Global brokerage Nomura believes India’s relative attractiveness to foreign investors could strengthen as corporate earnings improve, valuations remain below their post-pandemic averages and international headwinds begin to ease.Improving corporate earnings are also making Indian stocks more attractive.According to ET, Nomura says that normalised profit after tax for 134 companies in its BSE 200-plus universe increased 34% year-on-year in the second quarter of fiscal 2027, exceeding consensus estimates by 18%. Even after excluding the oil and gas sector, profit growth stood at 29%, which was 5% higher than expectations.Valuations have also become more favourable following the market correction. Nomura said most sectors are trading below their respective post-pandemic average valuations.This has created a more attractive entry point for foreign investors.In other factors that are contributing to the surge, the Democrats secured control of both the US Senate and the House of Representatives in a decisive midterm election victory, raising hopes that the US-Iran war could come to an end.The outcome is being viewed as a strong rebuke to President Donald Trump. His administration’s global tariff policy and decision to launch a war in the Middle East had contributed to the Indian stock market’s weaker performance.The Democratic sweep could provide support to Indian equities by reducing concerns over sudden shifts in US policy.“The US midterm verdict gave Indian equities fresh momentum, with the rally gathering pace on hopes that a more restrained Washington could pave the way for de-escalation in the Iran conflict and tariff policies. As the threat of geopolitical escalation and energy supply shocks faded, crude prices slumped, and a retreat in US Treasury yields and the dollar took further pressure off India’s inflation outlook and external accounts,” Vinod Nair, Head of Research, Geojit Investments Ltd, said.Vinod Nair said the improvement in market sentiment was supported by a consistent recovery in foreign investor buying and encouraging second-quarter earnings. He added that the rally had also gained credibility as participation widened beyond the frontline indices.The decline in crude oil prices has emerged as a significant positive for Indian markets. Brent crude has dropped by around 10% to approximately $94 a barrel, amid hopes that the US-Iran conflict could move towards a resolution.Cheaper crude could ease pressure on India’s inflation, import bill and current account. The decline is particularly significant given that elevated oil prices and geopolitical tensions had contributed to the earlier wave of foreign investor selling.Meanwhile, global semiconductor stocks and the US dollar came under pressure amid concerns about tighter scrutiny of AI data centres. Indian information technology stocks, which frequently move in the opposite direction to semiconductor shares, gained 2.4% during the session.
Is the rally sustainable?
Market experts believe that the current run is likely to sustain if global factors such as crude oil prices remain benign.Vatsal Bhuva, Technical Analyst at LKP Securities told TOI, “We believe the current rally in Indian equities is sustainable, supported by improving global factors such as Brent crude below $100, easing US 10-year Treasury yields and the ongoing reversal in global AI and semiconductor stocks.”“The rally is also gaining strength from FII buying and short covering, as accumulated bearish positions are being unwound. Nifty’s decisive reclaim of 24,000 in Thursday’s session further strengthens the outlook,” he said.“From a long-term perspective, the Nifty has historically witnessed strong recoveries near its 50-month SMA, which currently stands at 22,485, against the current index level of 24,527. This indicates that the long-term trend support remains intact,” Vatsal Bhuva said.“We expect this recovery to sustain, with potential targets of 27,000–28,000 for Nifty and 87,000–90,000 for Sensex over the next 12 months,” he added.According to Mayur Shah, PMS Fund Manager at Anand Rathi Advisors, the current stock market rally is the much awaited and anticipated backed by strong corporate earnings & macro indicators like strong GST collection, auto sales, electricity consumption data, credit growth showing momentum in capex.“Global uncertainty has started to cool down after US elections results. Crude oil is below $100. FIIs seems to have started returning back to the Indian Market. Rupee depreciation is arrested and stabilised. All these key indicators are directing the Indian market to a northward trajectory. If this continues we probably can see Nifty & Sensex surpassing all time highs,” he told TOI.Although the initial signs are encouraging, it remains too early to conclude that foreign investors have returned to Indian equities for the long term.Nomura has cautioned that the recovery in foreign flows remains exposed to several risks, including elevated crude oil prices, higher global bond yields, geopolitical uncertainty and concerns about technology spending. The brokerage also noted that longer-term uncertainties surrounding geopolitics and technology continue to weigh on India’s growth outlook.VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited warns that at higher levels, profit booking may emerge as DIIs are showing an inclination to sell on rallies.“After the initial reaction to the US election results weakens, there will be concerns surrounding prolonged political conflict in the US, since Trump being what he is, is likely to turn Mr Veto rather than lame duck president,” he cautions.(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)
