Why Dalal Street Turned Bullish: 7 Factors Behind the Sensex and Nifty Rally

7 Factors Supporting the Market Rally

1. Decline in crude oil prices

Crude oil prices dropped by over 3% as talks between Iran and Qatar continue. The lower oil prices could help India with import cost pressures given the country's heavy reliance on crude oil imports.

2. Strong quarterly earnings

Reliance Industries shares rose nearly 12% after the company reported a 41% year-on-year increase in consolidated net profit to ₹25,548 crore for the July–September quarter of FY27. Jio Platforms also reported a 14% rise in quarterly net profit, supporting investor sentiment.

3. Foreign investors return as net buyers

Foreign institutional investors (FIIs) were net buyers after a period of net selling. They bought nearly $1.2bn of Indian equities over the previous 10 trading sessions as per the report.

4. Expectations of LTCG tax relief

Expectations around possible changes to the tax treatment of long term capital gains (LTCG) added to the market's optimism. The report pointed to SEBI's recommendation of tax relief for foreign investors and for domestic mutual fund investors. These were all expectations, not actual policy changes.

5. Rupee strengthens against the US dollar

The rupee opened at 94.8850 to the dollar versus 94.95 of the previous close. The movement of the rupee and the general sentiment around the potential for policy action both helped to underpin the market.

6. Declining bond yields

Easing bond yields (the US 10-year Treasury yield falling below the 5% mark) added to the upbeat sentiment in the equity markets. Lower yields make equities relatively more attractive in comparison to fixed income.

7. Weakness in the global AI trade

Concerns around high valuations and the returns from AI investments were a drag on global tech stocks. That same sentiment was also helping to drive interest in Indian equities.

What should investors be watching next?

Whilst the rally was a clear indication of improving sentiment, a single session of strong gains doesn't mean that the trend will continue. Crude oil, foreign investor activity, corporate earnings, the currency and the wider world will all have an effect on the market's direction.

Investors should look at the individual stocks, their own financial objectives and their own level of risk tolerance rather than simply making decisions based on a sharp rise in the benchmark indices.