Indian stock markets have seen a strong upward movement today, continuing the momentum from Monday’s rally. The benchmark indices, Sensex and Nifty, are both trading in the green, reflecting optimism fueled by global and domestic factors. The Sensex surged by 1,140 points (1.54%), reaching 75,308, while the Nifty rose by 324 points (1.44%) to settle at 22,833 by 3:11 PM. The rally is largely driven by strong performances in the financial and metals sectors, with all major sectors showing positive growth.

Here’s a breakdown of the key factors behind today’s market rally:

1. Positive Global Cues

Indian equities have been riding high on the back of strong rallies in global markets. US stock markets posted solid gains, which helped boost sentiment across Asian markets. Hong Kong’s Hang Seng Index surged 2%, reaching a three-year high. Investor optimism surrounding China’s economic outlook, supported by favorable economic data and policy measures, contributed to the rise. The Hang Seng Index, up 23% year-to-date, is the best-performing major market globally.

Meanwhile, in Asia, China’s mainland stocks also saw modest gains, while MSCI’s broad index of Asia-Pacific shares rose 1%. Japan’s Nikkei Index rebounded by 1.5%, marking its largest daily gain in three weeks. The positive movement in these markets has helped set the tone for a strong day in India.

2. Boost from China’s Stimulus Measures

China has been ramping up efforts to stimulate domestic consumption, and its recent policy actions have further fueled optimism. Measures such as childcare subsidies and a special “action plan” to support consumption have been introduced. Additionally, retail sales data released on Monday indicated a faster growth rate in China, signaling a potential recovery in household spending. These actions are expected to provide a much-needed boost to the Chinese economy, further enhancing global investor sentiment.

3. US Retail Sales Data

Investor sentiment also got a boost from positive economic data out of the United States. US retail sales rebounded in February, rising by 0.2% after a sharp 0.9% decline in January. While the increase was below economists' expectations, it was still a positive sign that consumer spending, a key driver of the US economy, remains resilient despite economic headwinds.

4. Weakening US Dollar

The US dollar has been losing strength, hovering near a five-month low against the euro and other major currencies. The dollar index has dropped nearly 6% from its two-year high in mid-January, currently standing at 103.44. This weakness in the US dollar has benefited other currencies, including the Indian rupee, which opened slightly higher at 86.7625 per USD on Tuesday. A weaker dollar generally supports riskier assets, including equities, as it makes dollar-denominated investments less attractive.

5. Bargain Buying in India

The Indian market continues to recover from Monday’s losses, with investors capitalizing on attractive valuations in stocks that were previously beaten down. Technical indicators also suggest that the market had been oversold, making today’s rebound a natural correction. According to Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, favorable macro trends, such as positive GDP growth and rising gross tax collections, are helping to support the market’s recovery.

6. Geopolitical Developments – Russia-Ukraine Conflict

Geopolitical events have also been contributing to market optimism. Discussions between US President Donald Trump and Russian President Vladimir Putin regarding a potential ceasefire in the Russia-Ukraine conflict have been seen as a positive development. A resolution to the conflict could ease global energy prices and bring stability to broader markets, thereby supporting riskier assets such as equities.

7. Nifty Technical Indicators

From a technical perspective, Shrikant Chouhan, Head of Equity Research at Kotak Securities, highlighted a positive trend in Nifty. He pointed out that Nifty’s daily chart shows a bullish candle formation and a higher bottom pattern, signaling potential upward momentum. As long as Nifty stays above the 22,350 mark and the Sensex holds above 73,800, the bullish trend is expected to continue.

8. Is the Worst Over for Dalal Street?

Despite the positive domestic cues, there are still challenges from global factors that could hinder a sustained rally. Dr. Vijayakumar warns that issues like ongoing trade wars and foreign capital inflows into China could limit the market’s potential. Foreign Institutional Investors (FIIs), in particular, have been focusing more on China, leading to FII selling in emerging markets like India, where valuations remain high.

Although there are favorable domestic factors such as strong GDP growth and positive tax collections, global headwinds could prevent the market from reaching new highs. Furthermore, the market’s current valuations remain elevated, and any unforeseen global developments could trigger volatility.

Today’s rally in Indian stock markets is largely driven by a mix of positive global cues, China’s stimulus efforts, improving US retail sales data, and a weakening US dollar. Technical strength and favorable domestic factors, such as GDP growth and tax collection increases, are also supporting market optimism. However, challenges remain, especially from geopolitical risks and global trade tensions. As investors await key policy decisions from the US Federal Reserve, Bank of Japan, and Bank of England, the market’s direction will depend on how these events unfold in the coming days.

The market sentiment remains cautiously optimistic, but investors will be keeping a close eye on global developments and domestic signals to gauge the sustainability of the rally.