Sensex rises 500 pts from day's low, Nifty near 25,000: 5 reasons behind sharp market reversal

June 23, 2025 | Mumbai

In a surprising turnaround on Monday, benchmark equity indices staged a remarkable recovery after a tepid start, with the BSE Sensex rallying over 500 points from its intraday low and the NSE Nifty closing just shy of the psychological 25,000 mark. The sharp intraday reversal left investors optimistic ahead of a crucial week filled with domestic macro data and global cues.

By the closing bell, the Sensex settled at 82,230, gaining 341 points, while the Nifty 50 ended at 24,950, up 110 points from the previous close. The recovery comes after early-morning weakness triggered by weak global cues and profit booking in heavyweight sectors.

Let’s dive into the five key reasons behind Monday’s sharp recovery in the Indian equity markets:

1. Buying at Lower Levels

After a gap-down opening, investors used the dip as a buying opportunity. Blue-chip stocks, especially in the banking, FMCG, and capital goods sectors, witnessed significant interest as bargain hunters moved in.

“This is a classic case of ‘buy the dip’ strategy playing out. The Indian market has strong underlying momentum, and investors saw value after the initial correction,” said Vinit Mahajan, Senior Technical Analyst at Kotak Securities.

Banking stocks, including HDFC Bank, ICICI Bank, and Axis Bank, helped lift indices as they recovered from earlier losses.

2. Supportive Domestic Macro Data Expectations

With India’s GDP growth for Q1 FY26 expected later this week, investors are positioning themselves for a strong print. Economists are forecasting over 7.5% YoY growth, fueled by consumption recovery and higher government capex.

“Markets are anticipating a positive GDP reading, which could validate India’s position as the world’s fastest-growing major economy,” said Anjali Mehta, Economist at Motilal Oswal Financial Services.

Additionally, early monsoon progress and robust GST collection trends have reinforced optimism about domestic demand strength.

3. US Fed Commentary Eases Rate Jitters

Recent remarks by US Federal Reserve officials hinting at possible rate cuts later this year soothed global investor sentiment. The likelihood of a September rate cut is back on the table as inflation in the US shows signs of moderation.

Global cues, particularly from Wall Street and Asian markets, initially dampened mood. However, hopes of a less aggressive Fed provided much-needed support.

“The Fed’s dovish tone has rekindled appetite for risk assets globally. Emerging markets like India are set to benefit from potential capital inflows,” noted Rahul Chadha, CIO at Mirae Asset India.

4. Robust FII Inflows

Foreign Institutional Investors (FIIs) turned net buyers in the cash segment after several sessions of cautious trading. On Friday alone, FIIs pumped in over ₹2,100 crore, driven by improving valuation attractiveness and stronger rupee outlook.

The rupee remained firm around ₹82.60 per dollar, despite global dollar strength, signaling confidence among overseas investors.

“FII flows are likely to remain robust given India’s earnings resilience and political stability,” said Priya Nair, Head of Institutional Equities, Edelweiss.

5. Technical Breakout and Short Covering

From a technical standpoint, Nifty rebounded after testing crucial support levels near 24,700. The swift reversal triggered short covering, particularly in index heavyweights and frontline derivatives.

Options data showed strong writing at 24,800 Put and 25,000 Call, suggesting traders are expecting range-bound to bullish movement in the short term.

“The market respected its support levels and quickly reversed. With the Nifty approaching 25,000 again, it’s a sign of underlying strength,” said Ravi Singh, Technical Strategist at Sharekhan.

Sectoral Snapshot

Among the sectoral indices, Nifty Bank, FMCG, Capital Goods, and Auto led the charge. Nifty Bank surged nearly 1.2%, while FMCG stocks saw renewed interest amid easing input costs. Stocks like ITC, L&T, Maruti, and HUL posted healthy gains.

Conversely, IT stocks remained under pressure due to global demand concerns and currency volatility.

Market Outlook: What Should Investors Expect?

Analysts remain cautiously optimistic, citing strong domestic fundamentals but acknowledging external risks like geopolitical tensions and oil price volatility.

“The broader market remains in a consolidation phase, but positive triggers could lead to fresh all-time highs,” said Neelkanth Mishra, Chief Economist at Axis Capital.

With Nifty close to the crucial 25,000 mark, traders are advised to tread carefully in the near term. However, long-term investors could look for accumulation opportunities in quality sectors like banking, infrastructure, FMCG, and renewables.

India’s equity markets proved their resilience yet again with a sharp intraday reversal, driven by a mix of technical strength, foreign fund inflows, and macroeconomic optimism. While near-term volatility cannot be ruled out, the broader market setup remains constructive.