Sensex's 6-Day Winning Streak: What's Fuelling the Bull Run?

The Indian stock market is on a remarkable run. The benchmark Sensex has extended its winning streak to a sixth consecutive session, closing above the significant 82,000 mark for the first time.

The bulls are firmly in charge on Dalal Street. The S&P BSE Sensex advanced by 142.87 points (0.17%) to close at a record high of 82,000.71. Following suit, the NSE Nifty 50 also gained 33.20 points (0.13%), settling at 25,083.75. This impressive rally, the longest since late April, has seen the Sensex surge by nearly 2,000 points in just six sessions.

So, what is fuelling this powerful market rally? Let’s break down the key factors.

Key Drivers Fuelling the Rally

This powerful market momentum is built on a trifecta of positive domestic news and improving global sentiment that has investors cheering.

1. Optimism Over GST 2.0 Reforms: A major catalyst is the growing optimism around the next generation of Goods and Services Tax (GST) reforms. A panel of state finance ministers has recommended exempting individual health and life insurance premiums from the current 18% GST. This proposal, if approved by the GST Council, could significantly boost demand in the insurance sector and has already lifted financial stocks.

2. Historic S&P Sovereign Rating Upgrade: Confidence in the Indian economy received a major international endorsement when S&P Global upgraded India’s sovereign rating to ‘BBB’ from ‘BBB-’ on August 14, maintaining a “stable” outlook. This is the first such upgrade in over 18 years, making India a more attractive destination for foreign capital and potentially attracting fresh global funds into our equity markets.

3. Improving Global Sentiment: On the international front, easing geopolitical tensions and expectations of a possible rate cut by the US Federal Reserve in September have calmed investor nerves globally. Investors are now keenly awaiting Fed Chair Jerome Powell’s remarks at the Jackson Hole symposium for further cues on the global interest rate trajectory.

Beneath the Surface: A Look at Market Internals

While the headline indices are painting a rosy picture, the broader market is showing some signs of caution. On Thursday, while large-cap indices advanced, small-cap shares ended flat, and mid-caps slipped by 0.4%. This suggests that while blue-chip stocks are leading the charge, some profit-booking may be occurring in the broader market.

A key trend has been the divergence in investor activity. Domestic Institutional Investors (DIIs) have been the bedrock of this rally, remaining consistent net buyers. However, Foreign Portfolio Investors (FPIs) have been more circumspect, continuing to be net sellers. This dynamic is an important factor to monitor.

Navigating the Path Ahead: Key Levels and Risks

For investors, understanding the technical levels and potential risks is crucial for navigating the market’s next move.

• Nifty’s Crucial Levels: The Nifty 50 has closed above the psychologically important 25,000 mark. According to market analysts, the next major resistance zone is between 25,100 and 25,200. A decisive move above this could trigger further short-covering and push the index towards 25,300. Key support is now placed around the 24,900 level.
• Bank Nifty: The banking index has been a slight underperformer in this rally. It is currently consolidating, with key support seen between 55,350 and 55,525, and resistance around the 56,000 - 56,300 zone.
• Looming Headwinds: Despite the optimism, potential challenges remain. The most significant is the risk of US tariffs. A 25% US tariff on a wide range of Indian goods is set to take effect on August 27, in response to India’s continued import of Russian oil. This could be a major trigger for volatility in the coming days.

For now, the trend remains positive, and the sentiment is bullish. The market has successfully absorbed domestic and global triggers, setting a positive tone. As an investor, it’s a good time to review your portfolio and stay informed, but as always, avoid chasing momentum blindly and stick to your long-term investment strategy.

This article is for informational purposes only and does not constitute investment advice. Please conduct your own research before making any investment decisions.