Why Is The Market Rising Today? As the year-end approaches, attention is shifting to Dalal Street and the possibility of a Santa Claus rally. Indian equities extended their rebound for a second consecutive
session on Monday, with the Sensex and Nifty supported by a strengthening rupee and an improving global backdrop, as investors increasingly bet on interest-rate cuts by the US Federal Reserve early next year.
The benchmark Sensex climbed over 500 points to an intraday high of 85,461.19, while the Nifty 50 reclaimed the 26,100 level and touched 26,140. With this move, the 30-share index has gained nearly 1,000 points over the past two sessions, signalling a return of risk appetite after last week’s sharp volatility.
Market participants are increasingly betting on a year-end rally, supported by a turnaround in key macro indicators. According to V K Vijayakumar, Chief Investment Strategist at Geojit Investments, two developments could accelerate the ongoing upmove.
“It appears that the market is heading for a year-end rally,” Vijayakumar said. “A sharp reversal in the rupee and foreign institutional investors turning buyers in the cash market are mutually reinforcing factors. Together, they can trigger short covering and help benchmark indices scale higher.”
Key factors driving the rally
Rupee rebound
The Indian rupee strengthened sharply in early trade on Monday, appreciating 22 paise to 89.45 against the US dollar, aided by renewed foreign fund inflows and firm intervention by the Reserve Bank of India, according to market participants.
The recovery follows heavy selling earlier this month, when sustained capital outflows pushed the rupee beyond the 91-per-dollar mark for the first time. After hitting a record low of 91.0750 on December 16, the currency reversed course following two decisive RBI interventions, climbing back above 89.50 by the end of last week. Meanwhile, the dollar index hovered near 98.6, even as most Asian currencies traded lower.
FIIs return as buyers
Foreign institutional investors have turned net buyers in the cash market for three straight sessions, providing fresh momentum to the equity rebound. On Friday, December 19, FIIs bought shares worth about Rs 1,831 crore, while domestic institutional investors added an even stronger Rs 5,723 crore, pointing to broad-based institutional support.
“The market appears to be heading for a year-end rally, with two mutually reinforcing triggers — a sharp reversal in the rupee and FIIs turning buyers in the cash market,” said VK Vijayakumar, chief investment strategist at Geojit Investments. These factors, he noted, could also spur short covering and help benchmark indices scale higher. However, Vijayakumar cautioned that elevated valuations may limit the upside despite a supportive domestic macro backdrop and improving earnings prospects.
Supportive global cues
Indian markets tracked gains across Asia as a technology-led rally on Wall Street set a positive tone for risk assets, even as currency volatility in Japan highlighted lingering global uncertainties. Trading volumes remained light in the holiday-shortened week, but sentiment improved ahead of delayed US economic data expected to show resilient growth in the third quarter.
S&P 500 futures rose around 0.2%, while Nasdaq futures gained about 0.3%. In Asia, Japan’s Nikkei jumped 1.5%, supported by a weaker yen that boosted export-oriented stocks. South Korean equities advanced 1.8% on optimism around AI-linked earnings, while MSCI’s Asia-Pacific index excluding Japan edged up 0.3%.
Improving technical setup
From a technical standpoint, recent price action suggests the Nifty may be stabilising after weeks of decline, said Anand James, chief market strategist at Geojit Investments. Although the index has been moving along a downward trendline for the past three weeks, it is now better placed to attempt an upward move, with recent declines holding just above the previous week’s low — a sign of a potential bottoming process.
This setup could pave the way for an initial move toward the 26,300 level. However, James warned that a failure to sustain above 25,980 may result in consolidation, while a decisive break below 25,650 could trigger a deeper correction, with downside targets in the 25,300–25,130 zone.
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