Sensex Surges 444 Points, Nifty Crosses 24,700 Mark on Rate Cut Hopes and Market Optimism
June 5, 2025 – Indian stock markets closed on a high note on Thursday, buoyed by investor optimism and key macroeconomic factors that drove a notable rally across sectors. The BSE Sensex gained 444 points, or 0.55%, settling at 81,442, while the NSE Nifty climbed 131 points, or 0.53%, closing at 24,750. During the trading session, the Sensex had surged as much as 913 points, and the Nifty briefly touched 24,899.
Key Drivers Behind the Market Rise
Several factors contributed to the strong market performance, with rate cut expectations playing a pivotal role, alongside global economic cues and sectoral gains:
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Weakening US Dollar and Declining Treasury Yields
A softer US dollar and falling US Treasury yields positively influenced investor sentiment. The US dollar index dropped to 98.82, continuing a decline over the past two days, which tends to benefit emerging markets like India. Lower dollar strength attracts foreign investment and supports the Indian rupee. Concurrently, yields on US bonds fell sharply after weak economic data in the US raised hopes for monetary easing. The 10-year Treasury yield declined by 2.4% to 4.355%, while the 30-year yield dropped by 1.95% to 4.864%. -
Anticipation of RBI Rate Cut
Market participants are increasingly optimistic about a policy rate cut by the Reserve Bank of India (RBI) in its upcoming announcement on Friday. Investors expect the central bank to reduce its key lending rate by 25 basis points for the third consecutive meeting. Such a move is seen as supportive of liquidity and economic expansion, which led to heightened buying interest in equities ahead of the decision. -
Return of Foreign Institutional Investor (FII) Buying
After three sessions of selling, FIIs turned net buyers on June 4, purchasing equities worth Rs 1,076 crore. Domestic institutional investors (DIIs) continued their buying streak, investing Rs 2,566 crore for the 12th consecutive day. This resurgence of institutional buying added momentum to the market rally. -
Decline in Crude Oil Prices
Oil prices retreated by nearly 1% due to increased gasoline and distillate inventories in the US, signaling weaker demand. Additionally, Saudi Arabia’s decision to cut crude prices for July deliveries exerted further downward pressure. Brent crude closed at $64.85 per barrel, while WTI crude stood at $62.74 per barrel. Lower oil prices ease input costs and inflationary pressures, supporting market sentiment.
Sectoral and Broader Market Performance
The rally was broad-based with notable contributions from specific sectors:
- Nifty Realty and Pharma led the gains, surging 1.75% and 1.3%, respectively, driven by positive investor sentiment around real estate and pharmaceutical companies.
- Nifty IT and Nifty Metal indices also ended higher by 0.5% each, reflecting widespread buying interest.
- The Nifty Smallcap and Midcap indices advanced 1% and 0.7%, respectively, indicating healthy participation from mid and small-cap segments.
Impact on Market Capitalization and Investor Confidence
The total market capitalization of all companies listed on the BSE rose by Rs 2.4 lakh crore to Rs 447.61 lakh crore, underscoring broad market strength. Investors grew more confident on the back of global and domestic cues, with Reliance Industries and pharmaceutical stocks registering significant gains.
Expert Commentary
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted, “The drop in US Treasury yields is positive for emerging markets like India over the medium term, although geopolitical and trade-related uncertainties could temper near-term gains.”
Looking Ahead
With the Reserve Bank of India’s policy announcement scheduled for Friday, market participants will closely monitor the RBI’s stance on interest rates and liquidity. The prospect of a rate cut remains a key driver for the equity market’s near-term outlook.
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