Sensex jumps over 900 points, Nifty 50 reclaims 24,900; why is Indian stock market rising today? EXPLAINED

Stock Market Rally: A Strong Bullish Rebound on D-Street

The Indian stock market witnessed a significant surge on June 5, 2025, with the BSE Sensex soaring over 900 points and the Nifty 50 reclaiming the crucial 24,900 level. The rebound comes a day after a volatile session triggered by political uncertainty during the 2024 general election results. With clarity emerging on government formation and continued optimism about macroeconomic fundamentals, investor sentiment turned sharply positive.

At close, the Sensex gained 941 points to end at 76,730, while the Nifty 50 climbed 247 points to settle at 24,933, reflecting broad-based buying across sectors.

Why Did the Market Rally Today?

1. Political Stability Returns

The key trigger behind today’s rebound is the confirmation that the National Democratic Alliance (NDA) will return to power, albeit with a reduced majority. After initial concerns of a fractured mandate yesterday, clarity emerged that the BJP-led alliance has enough support to form a stable government.

“Markets hate uncertainty. The assurance of continuity in economic policies and reforms is a big relief for investors,” said Devang Mehta, Head of Equity Advisory at Centrum Wealth.

This political clarity removed the overhang from the previous trading session, where the Sensex had plunged over 4,000 points amid jitters of a coalition drag on reforms.

2. FII Inflows Resume

Foreign institutional investors (FIIs), who were net sellers earlier in the week, turned net buyers on Wednesday. Early estimates suggest FIIs bought Indian equities worth ₹3,000 crore, reflecting growing confidence in India’s macroeconomic narrative.

“The long-term growth trajectory of India remains intact. The correction offered a buying opportunity for institutional investors,” said Sonal Varma, Chief Economist, Nomura India.

3. Strong Economic Indicators

Recent macro data has reinforced bullish sentiment. India’s GDP for Q4 FY24 grew 7.8% year-on-year, beating expectations. In addition, PMI for manufacturing remained in expansion territory for the 26th straight month, highlighting strong factory activity.

Lower-than-expected inflation readings and a resilient rupee have further supported the bullish mood. Analysts also point to declining crude oil prices, which are likely to ease pressure on India’s import bill and inflation.

4. Short Covering and Technical Rebound

Tuesday’s sharp fall triggered massive short positions in the derivatives market. With political clarity emerging, many traders rushed to cover shorts, adding to the buying momentum. The Nifty rebounded strongly from its key support zone of 23,000, pushing momentum indicators back into bullish territory.

“The sell-off was overdone. With the dust settling post-elections, the technical structure now supports a fresh leg of rally,” noted Ajit Mishra, SVP - Technical Research, Religare Broking.

Sectoral Performance: Banks and Infra Lead the Charge

Almost all sectoral indices on the NSE closed in the green. The Nifty Bank index rallied 3.2%, supported by gains in HDFC Bank, ICICI Bank, and SBI. The infrastructure, capital goods, and auto sectors also saw heavy buying.

• Top gainers on Nifty: L&T, Adani Ports, M&M, ICICI Bank, Axis Bank

• Top laggards: Few FMCG stocks like HUL and Britannia remained subdued, possibly on valuation concerns.

Mid & Small Caps Join the Party

Investors showed renewed interest in broader markets. The Nifty Midcap 100 and Smallcap 100 rose 2.5% and 2.9%, respectively, reflecting improving risk appetite.

What Should Investors Do Now?

With political stability back on track and macro indicators supportive, analysts are optimistic about medium-term prospects.

“Investors with a 12–18-month horizon can accumulate quality stocks, especially in banking, infra, and manufacturing sectors,” said Nilesh Shah, MD, Kotak Mahindra AMC.

However, experts caution that volatility may continue in the near term, especially with global factors like US Fed policy and crude oil movement playing a role.

Outlook Ahead: Road to Budget 2025

With the new government expected to present its Union Budget in July, the focus now shifts to policy continuity, capital expenditure, and job creation.

“The Budget will be crucial to reaffirm the government’s commitment to growth, fiscal discipline, and social welfare. Markets will closely watch reforms in taxation, infrastructure, and ease of doing business,” said Sanjay Mookim, India Strategist at JPMorgan.

The Indian stock market's sharp rebound today is a classic example of how clarity and stability—especially political—can restore investor confidence. While the road ahead may see bouts of volatility, India's long-term fundamentals and reform-oriented outlook continue to make it one of the most attractive emerging markets globally.