The Indian stock market witnessed a fresh wave of healthy buying across segments on Friday, May 2, driving the benchmark Sensex up by over 900 points and helping the Nifty 50 reclaim the 24,550 mark.
The Sensex opened at 80,300 against its previous close of 80,242 and jumped over 900 points to hit an intraday high of 81,178. The Nifty 50, on the other hand, started the day at 24,312 against its previous close of 24,334 and touched an intraday high of 24,589, jumping more than 250 points, or 1 per cent. The BSE Midcap and Smallcap indices rose by up to a per cent.
However, the indices pared gains significantly. Around 2:40 PM, the Sensex was 191 points, or 0.24 per cent, up at 80,433.
Why is the Indian stock market rising today?
Experts highlight the following five key factors that are driving the Indian stock market higher:
1. Easing trade war anxiety
Concerns over a trade war between the US and China are easing, driving investors’ risk appetites.
According to Reuters, China’s commerce ministry said the US has repeatedly expressed its willingness to negotiate on tariffs and that Beijing’s door is open for talks.
Earlier, Trump said trade agreements could be reached with India, Japan, and South Korea.
“The high probability of India among the five allies of the US entering into early trade deals with the US is also a significant positive factor,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
The market is discounting the possibility of favourable trade deals between the US and its allies, which would brighten the global economy’s growth outlook and curtail the risk of inflation.
2. Healthy gains in banking majors
Some heavyweight banking stocks—including ICICI Bank, HDFC Bank, and Axis Bank—were among the top contributors to the Sensex’s gains.
The Nifty Bank index rose over 1 per cent during the intraday session. The index had jumped nearly 7 per cent in March and April.
The recent rally in banking stocks can be attributed to their better-than-expected March quarter (Q4) results and the improving liquidity outlook, driven by potential rate cuts and the Reserve Bank of India’s bond purchase plan.
On April 28, the RBI announced it would buy bonds worth ₹1.25 trillion ($14.7 billion) in four tranches during the first three weeks of May.
“The RBI’s decision to inject ₹1.25 lakh crore worth of liquidity via OMO purchases in May is seen as a positive for the banking sector, potentially easing liquidity,” said Siddhartha Khemka, Head – Research, Wealth Management, Motilal Oswal.
3. Foreign capital inflow
Foreign institutional investors (FIIS) have been on a buying spree in the Indian stock market over the last several days amid the country’s healthy growth outlook despite global uncertainty, improving earnings and the dollar’s decline.
“The surprising resilience of the domestic market has been primarily driven by the sustained FPI buying for eleven trading days in a row, taking the cumulative FPI buying for this period to ₹37,375 crore. FPI buying has been driven by weakness in the dollar and declining growth prospects in the US,” said Vijayakumar.
4. Rupee’s rise
The Indian rupee surpassed the 84 per US dollar mark for the first time since October 2024, influencing market sentiment.
The domestic currency strengthened following a decline in the US dollar, amid signs of an economic slowdown in the world’s largest economy.
As reported by Reuters, the US economy contracted for the first time in three years in the first quarter of the calendar year (Q1CY25). The US GDP contracted at a 0.3 per cent annualised rate last quarter. Meanwhile, US manufacturing contracted for a second straight month in April. The ISM’s manufacturing PMI dropped to a five-month low of 48.7 last month from 49.0 in March.
5. Stable Q4 earnings, healthy macro outlook trigger buying on dips
Investors are buying stocks after the domestic market benchmarks ended flat in the past two consecutive sessions, as the medium- to long-term outlook remains positive due to a healthy macroeconomic environment and the prospects of a normal monsoon.
Stable March quarter earnings are also supporting market sentiment. A Mint analysis of 171 profitable listed companies reveals that around 52 per cent and 56 per cent of them have reported “impressive” revenue and net profit growths respectively, on a year-on-year basis.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.