Stock market today: Sensex, Nifty 50 gain nearly 2% each; what drove the Indian stock market today? - explained

Stock market today: Indian stock market benchmarks, the Sensex and the Nifty 50, gained almost 2 per cent each on Friday, August 16, with the Nifty 50 reclaiming the 24,500 mark and the Sensex surpassing the 80,500 mark.

The gains in the market were broad-based as the BSE Midcap and Smallcap indices also moved higher by 2 per cent. The overall market capitalisation of the firms listed on the BSE rose to nearly ₹451.5 lakh crore from ₹444.3 lakh crore, making investors richer by over ₹7 lakh crore in a single session.

Over 200 stocks, including Tech Mahindra, Colgate Palmolive (India), ICICI Lombard General Insurance Company, Info Edge (India) and Trent, hit their fresh 52-week highs in intraday trade on BSE.

Sensex opened at 79,754.85 against its previous close of 79,105.88 and touched the intraday high of 80,518.21. On the other hand, the Nifty 50 opened at 24,334.85 against its previous close of 24,143.75 and rose to the level of 24,563.90.

Eventually, the Sensex closed with a gain of 1,331 points, or 1.68 per cent, at 80,436.84, while the Nifty 50 settled 397 points, or 1.65 per cent, higher at 24,541.15.

Only three stocks—Divi's Labs, SBI Life, and Dr Reddy's Labs—ended in the red in the Nifty 50 index.

Shares of Wipro, Tech Mahindra and Grasim ended as top gainers in the Nifty 50 index, rising about 4 per cent each.

All key sectoral indices on the NSE ended with solid gains, with Nifty IT surging 3 per cent, followed by Realty, Media and Auto indices, each rising over 2 per cent.

Nifty Bank closed 1.6 per cent higher, while the Private Bank and PSU Bank indices closed with gains of 1.7 per cent and 1 per cent, respectively.

What drove the Indian stock market today?

Positive global cues seem to have triggered an across-the-board buying in the Indian stock market on Friday. A nearly 2 per cent gain in the S&P 500 and a 3.5 per cent gain in the Nikkei 225 had a rub-off effect on the Indian stock market.

Major markets across the globe rose after recent US macro data soothed fears of recession amid the expectations of a rate cut by the Fed in September.

A significant fall in the US inflation also influenced market sentiment. The US consumer prices for July rose below 3 per cent for the first time in nearly three-and-a-half years, raising hopes of a rate cut in September.

Meanwhile, India's retail inflation rose by 3.54 per cent in July, its lowest in nearly five years.

"Globally, stock markets have turned around smartly from the August 5th sell-off triggered by US recession fears and the unwinding of the yen carry trade. The latest data on US inflation and unemployment relief do not indicate the economy is tipping into recession. On the other hand, the 2.9 per cent annual inflation number and slightly softening labour markets set the stage for a Fed rate cut in September, which the market is pencilling in now," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

According to Santosh Meena, the head of research at Swastika Investmart, several factors have contributed to this bullish momentum.

"The fear of a reversal in the yen carry trade has subsided, and strong retail sales figures, along with better-than-expected job data, have alleviated concerns about a potential US recession. Additionally, the market is now fully pricing in a 25 basis point rate cut by the US Federal Reserve in September, further boosting investor confidence," Meena observed.

Experts observed that retail investors are buying market dips even though valuations remain elevated. On the other hand, foreign institutional investors (FIIs) have been selling Indian stocks in August.

NSDL data show FIIs have sold Indian equities worth ₹18,824 crores till the 14th of August this month. They have booked profit after buying Indian stocks worth ₹26,565 crore in June and ₹32,365 crore in July.

Domestic investors have been one the biggest drivers of the Indian stock market of late. The number of investors registered with the BSE now stands at 18.60 crore.

While the medium to long-term prospects of the Indian stock market remain bright, experts expect some volatility in the short term due to valuation concerns, geopolitical tensions and unimpressive Q1FY25 numbers.

On the technical front, according to Rupak De, Senior Technical Analyst at LKP Securities, the Nifty 50 may continue consolidating within the 24,300-24,550 range in the near term.

"Only a decisive move above 24,550 could trigger a directional up move in the index. A buy-on-dips strategy may be more effective unless the index decisively falls below 24,300," said De.

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