Investors were in a festive mood a few days ahead of Diwali, but the real reason behind Thursday's rally was oil, not sentiment.
Indian benchmark indices recorded one of their strongest single-day gains in recent months. The Sensex rose 2,008.61 points, or 2.6 per cent, to close at 79,310.01, and the Nifty gained 576 points, or 2.4 per cent, to settle at 24,536.60. It was the fifth straight session of gains. Investors became wealthier by Rs 7.03 trillion in a single day, as the total market capitalisation of BSE-listed companies rose to Rs 501.45 trillion from Rs 494.42 trillion.
The main trigger was a steep fall in crude oil prices. According to market reports, this came amid expectations of a quicker end to the West Asia conflict after the Democrats' win in the US midterm elections.
For India, which imports most of its oil, lower crude prices help in several ways. Experts said cheaper oil is expected to improve the inflation outlook, ease pressure on company margins and reduce the country's import bill. That explains why investors moved towards sectors that gain the most when costs and interest rates are expected to fall.
The Nifty Auto, Nifty Realty, Nifty Financial Services and Nifty Private Bank indices were the top performers, as money shifted into cyclical and rate-sensitive stocks. Automakers benefit from lower fuel costs and cheaper loans. Real estate and lenders gain when borrowing becomes easier.
However, not every stock joined the rally. Bajaj Finance, Shriram Finance and Mahindra & Mahindra were among the top losers in the Nifty pack. The Nifty Chemical and Nifty Media indices also underperformed the broader market.
The gains spread beyond large caps, but they became smaller further down the market. The Nifty MidCap 100 gained 1.87 per cent, while the Nifty SmallCap 100 rose a more modest 0.56 per cent. This suggests that investors still preferred quality large-cap stocks over riskier small caps.
What the charts are saying
Technical analysts said the Nifty has regained all its key moving averages on the daily chart, which points to a bullish trend reversal.
"Any dip towards 24,200 could act as immediate support, while 24,000 remains crucial positional support. On the upside, resistance is placed at 24,800 and 25,000. A buy-on-dips strategy remains advisable," market experts stated.
A rally built on hope
The timing is important. Diwali trading usually brings fresh retail interest, and Thursday's rally gives market sentiment a strong lift heading into the festival. Still, experts cautioned that this is a rally driven by hope, not a settled outcome.
"For now, the stars appear aligned, with crude, yields, earnings and foreign flows all turning in the market's favour, keeping the near-term bias constructive. Yet the rally's staying power will ultimately depend on whether breadth remains strong and whether the hope of de-escalation translates into concrete progress on the ground," market watchers noted.
For now, Dalal Street is celebrating Diwali a little early. Whether the momentum lasts will depend less on the festive mood and more on developments in West Asia and the direction of crude prices.
