Nifty Powers Past 25,000, Sensex Soars as Bulls Dominate Dalal Street

Indian equity benchmarks extended their gains for a second consecutive session on Monday, May 26, 2025, with the Nifty 50 decisively crossing the psychological 25,000 mark and the BSE Sensex posting significant gains, driven by a confluence of strong domestic triggers like a record RBI dividend and positive global market sentiments.

The Indian stock market witnessed a robust rally as bulls took firm control of Dalal Street. The positive momentum was palpable from the opening bell, continuing throughout the trading day, although some intraday gains were pared due to mild profit-booking.

Market Performance on May 26, 2025

The trading session on Monday was marked by broad-based buying and renewed investor confidence.

• The NSE Nifty 50 index climbed 148 points, or 0.60%, to settle at 25,001.15. During the day, the index showed strong upward movement, breaking out of its recent consolidation zone.
• The BSE Sensex jumped 455.37 points, or 0.56%, to close at 82,176.45. The 30-share benchmark had surged over 770 points during intraday trade, reaching its highest level in over a week before settling slightly lower.
• The Nifty Bank index also participated in the rally, gaining 173.75 points, or 0.31%, to close at 55,571.
• Reflecting the increased activity and some caution, the India VIX, a measure of market volatility, jumped 4.28% to 18.02.

Market breadth was positive, indicating widespread participation in the rally.

Key Catalysts Driving the Rally

Several factors contributed to the upbeat market sentiment:

Strong Domestic Cues

1. Record RBI Dividend: The Reserve Bank of India (RBI) announced a record dividend payout of ₹2.69 trillion (₹2.7 lakh crore) to the government for the fiscal year 2025 (FY25). This substantial transfer is expected to bolster the government’s finances, aid fiscal consolidation, and potentially lead to lower interest rates, creating a favorable environment for equities. V K Vijayakumar of Geojit Financial noted that this dividend would help contain the fiscal deficit target for FY26 at 4.4%.
2. Optimism over India’s Economic Standing: Positive sentiment was also fueled by reports of India becoming the fourth-largest economy in the world, overtaking Japan, as stated by NITI Aayog CEO BVR Subrahmanyam. [1, Source from initial search] This news boosted near-term market morale.
3. Early Onset of Monsoon: The early arrival of the monsoon in parts of the country has raised hopes for a healthy agricultural season and improved rural demand, which is a significant positive for the Indian economy.
4. Decline in Domestic Bond Yields: A fall in domestic bond yields also encouraged investors to shift focus towards riskier assets like equities.

Positive Global Cues

1. Easing Global Trade Tensions: Reports that the US might consider extending the deadline for imposing previously announced aggressive tariffs on the European Union helped soothe investor nerves globally.
2. Strong Overseas Markets: European markets were trading mostly higher on Monday, with Germany’s DAX surging 1.67% and the STOXX 50 gaining 1.42% (as of May 26 afternoon IST).
3. Bullish U.S. Futures: U.S. market futures also indicated a positive opening, with NASDAQ futures up 1.41% and S&P 500 futures rising 1.21% (as of May 26 afternoon IST), signaling continued global risk-on sentiment.
4. Softer U.S. Dollar: The dollar index was trading softer, between 98.67 and 98.81, which generally supports emerging market currencies and inflows.

Sectoral Spotlight

The rally was broad-based, with several key sectors contributing to the gains:

• Auto, IT, and Metal sectors were at the forefront of the advance.
• FMCG stocks also saw significant buying interest.
• Banking stocks recorded marginal gains.

Among Sensex constituents, Mahindra & Mahindra was a top gainer, rising 2.2%, followed by HCL Tech, Tata Motors, Nestle, ITC, Hindustan Unilever, Larsen & Toubro, and Tech Mahindra. On the Nifty, Divi’s Labs jumped 3.5% following news of a global pharma supply deal, while JK Cement surged 6% after reporting strong volume growth. Conversely, Eternal (formerly Zomato) was the worst performer on the Sensex, falling 4.5% after FTSE and MSCI reduced the stock’s weightage in their indices.

FII and DII Activity

Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) both emerged as net buyers on May 26, providing strong support to the market.

• FIIs were net purchasers of ₹135 crore worth of stocks.
• DIIs made substantial net purchases worth ₹1,745 crore.

The Rupee’s Surge

The Indian Rupee also had a strong showing, opening the week with notable gains against the U.S. dollar. The local currency opened at 85.02 and jumped by as much as 40 paise during the day, marking its strongest single-day rise since November 2022. This appreciation was attributed to the weakness in the U.S. dollar and the positive domestic cues, including the RBI’s hefty dividend.

Expert Outlook and Technical Levels

Market experts maintain a generally positive outlook, though they advise caution and stock-specific strategies.

• Gift Nifty was trading 0.71% higher at 25,020 ahead of Tuesday’s session, suggesting a potential firm start for May 27.
• Nandish Shah (HDFC Securities) noted that Nifty has regained momentum after breaking out of the 24,500-25,000 consolidation zone. Immediate resistance is seen at 25,207, with support at 24,800.
• Ajit Mishra (Religare Broking) emphasized that surpassing the 25,200 hurdle is crucial for Nifty to continue its upward momentum. He advised traders to remain stock-specific and use dips to buy quality stocks.
• Rupak De (LKP Securities) pointed out that Nifty’s higher top–higher bottom formation remains intact, suggesting dips are buying opportunities. The next target is seen at 25,300/25,350, with support at 24,800.
• Om Mehra (SAMCO Securities) highlighted that Nifty’s daily RSI at 61 indicates healthy momentum without being overbought. Crucial resistance lies in the 25,180-25,200 range; a breakout above this could trigger fresh buying.

What to Watch Next

Investors will be closely watching several upcoming events and data releases:

• Domestic Macro Data: India’s April industrial output data and Q1 GDP figures are due on May 28, which will provide critical insights into the country’s growth trajectory.
• Global Cues: U.S. bond yields, FOMC minutes, and developments in India-U.S. trade talks will be on the radar.
• Market Dynamics: The expiry of May’s derivatives contracts and the final leg of the Q4 earnings season could introduce short-term volatility.
• Foreign Investor Activity: Trends in FII flows will continue to be a key factor.

Implications for Retail Investors

The current market rally, backed by strong fundamentals and positive sentiment, offers opportunities. However, retail investors should exercise caution. The rise in India VIX suggests that volatility might persist. It’s advisable to focus on quality stocks with strong fundamentals and consider a staggered investment approach. Consulting with a financial advisor before making investment decisions is always recommended, especially in a dynamic market environment. The market’s ability to sustain levels above Nifty 25,000 and Sensex 82,000 will be key in the near term.

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This article is for informational purposes only and does not constitute financial advice. Always do your own research before investing.