Key Factors Behind the Market Rally: Sensex Surges Nearly 1,400 Points, Nifty50 Hits Settles Above 23,700

Indian equity markets witnessed a robust rally on February 4, 2025, as both Sensex and Nifty50 surged over 1.5%, posting their highest single-day gains in over a month. The BSE Sensex jumped 1,397 points, while the Nifty50 index surged 378 points. The rally was broad-based, with strong buying interest across large-cap, small-cap and mid-cap stocks.

After opening higher, buoyed by a positive handover from the US markets, the rally gained momentum throughout the trading session. Adding to the bullish sentiment, India VIX slipped down by 2.30%, indicating reduced market volatility.

Investors Gain ₹5.5 Lakh Crore as Market Capitalisation Soars

The rally resulted in a significant wealth boost for investors. The overall market capitalisation (m-cap) of BSE-listed firms rose from ₹419.5 lakh crore to nearly ₹425 lakh crore, making investors richer by approximately ₹5.5 lakh crore in a single day.

Broader market indices also mirrored the strength seen in frontline indices, with the Nifty Midcap 100 and Nifty Smallcap 100 indices witnessing substantial buying interest. Market breadth remained positive, as 1,760 stocks advanced, compared to 689 stocks that declined on the National Stock Exchange (NSE).

Key Drivers Behind the Market Rally

Several factors contributed to the sharp rise in Indian equity markets:

1. Pause on US Tariff Plans

The recent trade policies of US President Donald Trump had been weighing on global market sentiment. However, reports indicate that the Trump administration has paused proposed tariffs on Canada and Mexico, leading to improved investor sentiment globally.

2. Anticipation of RBI Rate Cuts

There is growing speculation that the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) may begin cutting interest rates, providing further support to equities. Lower interest rates generally reduce borrowing costs and stimulate economic activity, leading to increased market participation.

3. Valuation Comfort in Large-Caps

The Nifty50 had declined by 11% from its peak, making select large-cap stocks relatively more attractive to investors. This valuation comfort likely triggered renewed buying interest, especially in frontline blue-chip stocks.

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