Stock Market Surges on Rate Cut Hopes and Other Key Factors: Sensex Rises 444 Points, Nifty Above 24,700
June 5, 2025 | ETMarkets.com
Indian stock markets closed on a positive note on Thursday, driven by a blend of encouraging economic signals and sectoral gains. The BSE Sensex rallied by 444 points, a 0.55% increase, closing at 81,442, while the NSE Nifty gained 131 points, or 0.53%, to finish at 24,750. During intraday trading, the Sensex surged as much as 913 points, and the Nifty briefly touched 24,899, indicating strong market momentum.
Robust Gains Led by Realty and Pharma Sectors
On the sectoral front, the Nifty Realty index led the charge with a 1.75% gain, closely followed by Nifty Pharma, which rose 1.3%. Other key indices such as Nifty IT and Nifty Metal also recorded modest gains of around 0.5% each. The broader market participated in the rally as well, with the Nifty Smallcap index advancing by 1% and the Midcap index by 0.7%. These gains contributed to a significant increase in the overall market capitalization on the BSE, which rose by Rs 2.4 lakh crore to reach Rs 447.61 lakh crore.
Four Core Drivers Behind the Market Rally
Market analysts and experts attribute the bullish market sentiment to four primary factors:
1. Weaker US Dollar and Falling Treasury Yields
One of the significant contributors to the market upswing was the decline in the US dollar index, which dropped to 98.82, extending a 0.4% decline over the preceding two days. A weaker dollar often benefits emerging markets like India by making them more attractive to foreign investors and providing support to the Indian Rupee.
Simultaneously, US Treasury yields fell sharply following soft economic data, which raised hopes for potential interest rate cuts by the US Federal Reserve. The 10-year Treasury yield declined by 2.4% to 4.355%, while the 30-year yield slipped 1.95% to 4.864%. According to VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, “The drop in yields is positive for emerging markets like India in the medium term, although geopolitical and trade-related uncertainties may limit near-term gains.”
2. Expectations of RBI Rate Cut
Investor optimism was further buoyed ahead of the Reserve Bank of India’s (RBI) monetary policy announcement scheduled for Friday. Market participants widely expect the RBI to reduce its key lending rate by 25 basis points for the third consecutive meeting. Such a move is anticipated to enhance liquidity in the market and support economic growth, thereby fueling equity buying.
3. Resurgence of Foreign Institutional Investors (FIIs)
Foreign institutional investors turned net buyers after three sessions of net selling, acquiring equities worth Rs 1,076 crore on June 4. Domestic institutional investors (DIIs) also maintained their buying streak for the 12th straight day, investing Rs 2,566 crore. This return of foreign inflows is seen as a strong vote of confidence in Indian equities amid global market uncertainties.
4. Decline in Crude Oil Prices
Crude oil prices slid nearly 1% following US data revealing a higher-than-expected increase in gasoline and distillate inventories, signaling weaker oil demand. Additionally, Saudi Arabia’s decision to cut prices for July crude deliveries exerted further downward pressure on oil prices. Brent crude settled at $64.85 per barrel, while West Texas Intermediate (WTI) crude fell to $62.74. The easing of oil prices is positive for the Indian market by reducing input costs and potentially improving corporate profit margins.
Sector Highlights: Reliance Industries and Pharma Stocks Shine
Prominent players like Reliance Industries saw notable gains amid these favorable conditions. The pharmaceutical sector’s rally reflected improved investor confidence in defensive sectors amid ongoing global economic uncertainties. Realty stocks also delivered strong performances, likely due to positive domestic demand sentiments and real estate sector reforms.
Market Outlook
The Indian equity market’s ascent reflects a combination of global economic cues and domestic factors, notably the anticipated RBI rate cut and return of foreign investment. While short-term volatility cannot be ruled out due to geopolitical concerns and trade issues, market strategists remain cautiously optimistic about the medium-term prospects for Indian equities.
Investors are advised to monitor the RBI’s monetary policy announcement closely, as its outcome is expected to steer market trajectories in the days ahead.
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