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The Indian stock market benchmarks, Sensex and Nifty 50, extended their gains into the third consecutive session, ending at fresh closing highs on Friday, June 7, following the Reserve Bank of India’s decision to maintain the repo rates and policy stance while revising the GDP estimates for FY25 upwards. Despite a significant 6% loss on June 4, market benchmarks have recorded substantial gains in June. The Sensex is up about 3.7%, and the Nifty 50 has gained nearly 3.4% in the first week of June.
During the session, the Sensex reached a new all-time high of 76,795.31 before closing 1,619 points, or 2.16%, higher at 76,693.36, with all components in the green. The Nifty 50 ended 469 points, or 2.05%, higher at 23,290.15, with only SBI Life (down 1.03%) and Tata Consumer (down 0.43%) in the red. Additionally, the BSE Midcap index rose by 1.28%, while the smallcap index saw a gain of 2.18%. The overall market capitalization of firms listed on the BSE surged to nearly ₹423.4 lakh crore from ₹415.9 lakh crore in the previous session, making investors richer by about ₹7.5 lakh crore in a single session.
Key factors boosting the stock market:
RBI raises growth forecast:
The RBI increased its GDP growth forecast for FY25 to 7.2% from 7%. The central bank anticipates an above-normal monsoon and buoyancy in services activity to drive rural and urban consumption, boosting the domestic economy. This positive outlook has significantly influenced market sentiment. The RBI projected real GDP growth for FY25 at 7.2%, with quarterly growth rates around 7.2% to 7.3%.
Easing inflation fears:
The RBI expects inflation to moderate due to an above-normal monsoon and stable crude oil prices. Governor Shaktikanta Das projected CPI inflation for FY25 at 4.5%, assuming a normal monsoon, which bodes well for the kharif season. The timely arrival of monsoon rains and expectations of a widespread distribution also contribute to easing inflation concerns, further boosting investor confidence.
Rate cut hopes:
Experts believe the RBI may begin rate cuts sooner than anticipated, as indicated by the split voting pattern within the six-member MPC. This sentiment aligns with global trends, as major economies, including the European Central Bank, have started adjusting key rates. This potential for rate cuts is seen as a positive driver for the market.
Political stability and policy continuity:
The BJP-led NDA coalition’s formation of a new government under Prime Minister Narendra Modi promises political stability and policy continuity. Modi’s commitment to a pro-development agenda and anticipated reforms are expected to drive further market gains. The assurance of stability within the coalition government has fueled a broad-based rally in the domestic market, pushing the Indian market to new highs.
Technical factors:
Market experts highlight a positive short-term formation, though temporary overbought conditions could lead to range-bound activity at higher levels. Key support zones are identified at 23,000-22,800/75,500-74,900, with resistance areas at 23,500-23,700/75,200-75,800. Short-term traders are advised to adopt a strategy of buying on dips and selling on rallies.
Indian stock market’s recent performance reflects a combination of positive economic forecasts, easing inflation fears, potential rate cuts, political stability, and favorable technical conditions. Investors remain optimistic about continued growth and stability in the market.