Stock Market Rally: Nifty Rises Above 25,500, Sensex Up Over 900 Points — Key Drivers Behind Advance

India's benchmark indices rose over 1%, extending gains for the third day on Thursday, amid positive global cues and easing tension between Iran and Israel. Nifty rose above 25,500, while Sensex was up over 900 points. The broader segment of the market was also positive, with the Nifty Midcap 100 rising 0.43% and Smallcap 250 up 0.52%.

The markets were "buoyed by the RBI's upbeat bulletin on India's resilience and easing geopolitical tensions", said Prashanth Tapse, senior VP (research), Mehta Equities Ltd.

Nifty 50 rose 1.13% to 25,529.50 level, while Sensex was up 1.15% to 83,706.16.

"Despite a cautious Fed and June F&O expiry, bulls remain confident," said Tapse.

According to Vikas Jain, head of research at Reliance Securities, the rally could also be credited to optimism around a potential interest rate cut by the US Federal Reserve in the upcoming July policy meeting, and a roughly 20% decline in oil prices from recent highs.

Volatility index VIX fell over 0.87% on Thursday.

Domestic Tailwinds

The rally wasn't just a global spillover. Bullishness was underpinned by the Reserve Bank of India's latest bulletin highlighting India's economic resilience.

"Nifty surged nearly 1% yesterday to close at an eight-month high above the 25,200 level, signaling market strength and a bullish trend," said Jain. Hopes of further rate cuts by the RBI are expected to provide support to Indian equities at lower levels, he said.

Global Cues

Asian equities rose early Thursday, bolstered by Japanese stocks after a flat session on Wall Street as traders assessed simmering economic and geopolitical risks. Japan Index rose 1% while Australia and South Korea Index are trading flat. The dollar fell early Thursday after a media report that President Donald Trump may announce a new Federal Reserve Chair, even with 11 months left in Jerome Powell's term.

The US stocks rally lost some steam on Wednesday when S&P 500 index—that was few points away from its all-time high—ended the session flat. This was after US Federal Reserve Chair Jerome Powell said that the officials were struggling to determine the toll of tariffs on inflation.

On the other hand, technology heavy Nasdaq 100 index rose 0.2% and posted its all-time closing high after Nvidia Corp. hit a record high and Micron Technology Inc. gave an upbeat forecast. The Dow Jones Industrial Average was down 0.2%.

The truce between Iran and Israel appears to be holding, reducing supply disruptions in the Middle East and pushing markets higher.

Rupee

The Indian rupee opened 17 paise stronger against the US dollar on Thursday, trading at Rs 85.92 compared to its previous close of Rs 86.09 on Wednesday. However, it further strengthened by 43 paise to 85.66 against US dollar. This is the highest level since June 12.

Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, advised exporters to hold their positions while importers may start hedging for the near term.

Bhansali also mentioned that the RBI's short position fell to $73 billion in the monthly bulletin, with outstanding positions for up to three months down to $15 billion, providing comfort to the RBI in case of a run on the rupee by selling dollars.