Benchmark stock market indices surged on Tuesday, led by a strong rally driven by significant gains in banking, financial, and energy stocks. The S&P BSE Sensex rose by a substantial 992.84 points, closing at 80,109.85, while the NSE Nifty50 saw an impressive gain of 314.65 points, finishing the day at 24,221.90. This rally was a welcome development for investors, as it marked a notable recovery after a period of volatility.
Vinod Nair, Head of Research at Geojit Financial Services, attributed the rally to the positive market sentiment generated by the results of the major state elections. These outcomes were perceived as contributing to greater political stability, which, in turn, increased the likelihood of government spending in the second half of FY25. Nair also pointed out that the government’s focus on meeting its capital expenditure (capex) target had fueled optimism, particularly in sectors that are closely tied to infrastructure development and industrial growth. These sectors, including infrastructure, capital goods, and industrials, outperformed the broader market, driven by expectations of a surge in new order inflows.
In addition to the election results, market sentiment was further bolstered by the expectation of a positive second half of the year. A good monsoon, the festive season, and the upcoming wedding season were expected to play a significant role in boosting consumer demand, which could counterbalance the earnings downgrades that occurred during Q2. These factors were seen as promising indicators for both corporate performance and overall economic growth.
On the Nifty50 index, ONGC emerged as the top performer, posting a remarkable increase of 5.48%. Bharat Electronics Limited (BEL) followed closely with a gain of 4.33%. Infrastructure giant Larsen & Toubro (L&T) demonstrated strong momentum, rising by 4.26%, while BPCL advanced by 4.01%. Shriram Finance also posted a solid gain of 3.78%, rounding off the list of top gainers for the day.
Despite the overall positive market performance, there were a few stocks that faced downward pressure. JSW Steel saw the steepest decline, dropping by 2.32%, while technology stocks experienced some weakness. Tech Mahindra saw a decrease of 0.71%, and Infosys was down by 0.59%. The auto sector also showed signs of weakness, with Maruti Suzuki falling by 0.55% and Bajaj Auto slipping by 0.39%.
In addition to the positive sentiment surrounding government spending and political stability, the market was also buoyed by expectations of a decline in food inflation. The government’s forecast of a bumper Kharif harvest raised hopes of easing inflationary pressures, particularly in food prices. This, in turn, was expected to support consumer confidence and contribute to stability in the broader market. VLA Ambala, Co-Founder of Stock Market Today (SMT), remarked that the Nifty index was likely to trade within a 3-5% range around the 23,300 levels, with the recent rally already reflecting a 4.50% gain from that range. He recommended a neutral strategy for investors, advising caution due to the possibility of volatility in the market.
All 16 sectoral indices ended the day in positive territory, with the Public Sector Undertaking (PSU) banks leading the pack. The strong performance of PSU banks was a significant driver of the broader rally, highlighting investor confidence in the financial sector. The government’s positive outlook on food inflation, combined with the overall optimism surrounding capex-linked sectors, contributed to the robust market performance.
Looking ahead, experts pointed out that the near-term market outlook would depend on the Nifty index’s ability to break through the resistance level of 24,350. Vinnaayak Mehta, Founder of The Infinity Group, cautioned that until this resistance level was decisively breached, the market could remain volatile. Investors were likely to be cautious due to significant call writing at the 24,400 level and put writing at the 24,200 level, which indicated potential support and resistance levels for the Nifty.
In summary, the rally on Tuesday showcased a market driven by strong investor sentiment, fueled by factors such as political stability, expectations of higher government spending, and a positive outlook for the second half of the year. Sectors linked to infrastructure and capital expenditure saw strong gains, while food inflation expectations and government measures to boost consumer confidence played a pivotal role in stabilizing the broader market. However, market volatility is expected to persist in the near term as investors closely monitor key resistance levels and economic indicators.
