Strong performances in the banking sector have led to the record breaking rise in the Indian stock market benchmarks – the Sensex and the Nifty 50 – defying weak global market trends. This upward momentum occurred even as mid-and small-cap segments lagged.
Market Performance Highlights
Nifty 50 reached a new peak of 23,754.15.
Sensex climbed to an unprecedented 78,164.71.
Nifty 50 closed at 23,721.30, up by 183 points (0.78 per cent).
Sensex finished at 78,053.52, gaining 712 points (0.92 per cent).
Despite these gains, mid-and small-cap indices did not follow suit, with the BSE Midcap and Smallcap indices declining by 0.26 per cent and 0.03 per cent, respectively. The overall market capitalisation of BSE-listed firms saw a marginal increase to ₹435.8 lakh crore from ₹435.6 lakh crore in the previous session.
Key Drivers
Banking Sector Boom
The primary catalyst for the market’s surge was the significant appreciation in banking stocks. Axis Bank, ICICI Bank, and HDFC Bank emerged as the top gainers on the Sensex. The Nifty Bank index hit a new high of 52,746.50, closing 1.74 per cent higher at 52,606.00.
“The rally is driven by large private banking stocks, which are attractively valued at present. PSU banks also look appealing from a valuation perspective,” commented VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Global and Domestic Influences
The robust performance of banking stocks came amid a backdrop of weak global markets. Major European indices traded lower, influenced by losses in the US markets, notably a 7 per cent drop in Nvidia shares impacting the S&P 500 and Nasdaq.
Domestic Sentiment and Future Prospects
Factors such as the anticipation of a healthy monsoon, a positive macroeconomic outlook, and expectations of policy continuity post-elections have bolstered investor confidence. The upcoming Union Budget, scheduled for July, is also seen as a potential market mover.
“Most private banking stocks had missed the recent upsurge, triggering activity in the financial space ahead of the monthly expiry,” noted Prashanth Tapse, Senior VP (Research) at Mehta Equities.
Market Outlook
Experts remain optimistic about the Indian stock market’s medium-term prospects, driven by a strong macroeconomic environment. The possibility of rate cuts later in the year is another factor likely to sustain market momentum.
“A favourable Budget can further propel the market, which has already set new highs post-election results. Investors are also eyeing potential rate cuts by the central bank,” said Sarvjeet Singh Virk, Co-founder and Managing Director of Shoonya by Finvasia.
Virk added, “If the Federal Reserve cuts rates, foreign investors will likely flock to equity markets, with India being a prime destination. Rate cuts would boost both demand and supply, enhancing the overall business environment and economy.”
Overall, while the market faces some challenges, particularly in the mid-and small-cap segments, the strong performance of banking stocks and positive domestic factors are likely to keep the Indian stock market on an upward trajectory.
