The equity benchmark indices posted their strongest weekly gains in years, driven by bargain hunting and optimism over a reversal in foreign portfolio investor (FPI) outflows.
The Sensex rose 558 points, or 0.7 per cent, on Friday to close at 76,906, while the Nifty 50 gained 160 points to end at 23,350.
Over the past five sessions, both indices advanced around 4.3 per cent — marking the Sensex’s best weekly performance since July 22, 2022, and the Nifty 50’s strongest rally since February 5, 2021.
The gains were broad-based, with the Nifty Midcap 100 and Nifty Smallcap 100 rising 7.7 per cent and 8.6 per cent, respectively — their most significant weekly gains since April and June 2020.
The market capitalisation of BSE-listed firms surged by Rs 4.7 trillion on Friday to Rs 413 trillion, bringing the weekly increase to Rs 22 trillion.
This week’s rebound followed sharp losses in the ongoing second half of the 2024-25 financial year, during which the Sensex and the Nifty declined 8.8 per cent and 9.5 per cent, respectively, while the Nifty Midcap 100 and Nifty Smallcap 100 fell 13.8 per cent and 15 per cent.
Analysts attributed the rally to bargain buying at lower levels.
FPIs were net buyers on Friday, purchasing Rs 3,239 crore worth of equities, while domestic institutional investors sold shares worth Rs 3,136 crore.
Investor sentiment was further buoyed by signals from the US Federal Reserve, which projected two interest rate cuts in 2025.
The outlook helped ease concerns over persistent inflation, with Fed Chair Jerome Powell suggesting that potential price pressures from US President Donald Trump’s trade policies might prove transitory.
Lower US interest rates enhance the relative appeal of emerging markets such as India, though market participants remain cautious.
Key market drivers will include corporate earnings for the December-March quarter, the Reserve Bank of India’s forthcoming monetary policy decisions, and developments in US trade policy — particularly Trump’s reciprocal tariff deadlines in early April.
“Short-covering fuelled this week’s gains amid positive news flow, but sustaining the rally will require genuine long-term buying,” said U R Bhat, co-founder of Alphaniti Fintech.
Without stronger economic triggers, the markets may re-evaluate, he said, adding, “I expect turbulence ahead, if March-quarter earnings are weak.
"Tariff uncertainties may weigh on sentiment.”
Market breadth remained strong, with 2,722 stocks advancing against 1,286 declines.
Among key gainers, ICICI Bank rose 1.5 per cent, while Larsen & Toubro gained 2.3 per cent, contributing significantly to the Sensex’s advance.
“Following a sharp recovery, the Nifty is approaching resistance around 23,400. A breakout could push it toward the 23,800-24,100 range, while key support lies at 22,750-23,000,” said Ajit Mishra, senior vice president of research at Religare Broking.
“Traders should focus on select picks with a favourable risk-reward ratio rather than chasing momentum.”
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