Sensex jumps 500 points; what drove the Indian stock market higher today? Explained with 5 factors

Stock market today: Snapping their two-day losing run, Indian stock market benchmarks- the Sensex and the Nifty 50- closed in the positive territory on Tuesday, January 28.

The Sensex opened at 75,659 against its previous close of 75,366.17 and rose 1,147 points, or 1.5 per cent, to an intraday high of 76,512.96. The Nifty 50 opened at 22,960.45, up from its previous close of 22,829.15, and jumped 309 points, or 1.4 per cent, to 23,137.95.

Both indices, however, pared gains. Finally, the Sensex closed 535 points, or 0.71 per cent, higher at 75,901.41, while the Nifty 50 closed the day at 22,957.25, up 128 points, or 0.56 per cent.

The mid and small-caps segment, however, underperformed. The BSE Midcap index closed with a loss of 0.61 per cent, while the BSE Smallcap index settled 1.77 per cent lower.

Due to losses in the mid- and small-cap segments, the overall market capitalisation of the BSE-listed firms dropped to nearly ₹409 lakh crore from ₹410 lakh crore in the previous session, causing investors to lose about ₹1 lakh crore in a day.

Sectoral indices today

Nifty Realty index jumped over 2 per cent, while Nifty Bank, PSU Bank, Private Bank, and Financial Services indices rose almost 2 per cent each. The Nifty Auto index rose over a per cent.

Among the losers, Nifty Pharma dropped over 2 per cent and the Nifty Media index declined over a per cent.

What drove the Indian stock market higher today?

Experts pointed out the following five factors that drove the market higher. Let’s take a look:

1. Gains in banking heavyweights

Banking and financial stocks, which hold significant weight in the benchmark indices, provided a strong boost to the market.

HDFC Bank, ICICI Bank, Axis Bank and Bajaj Finance ended as the top contributors to the gains in the Sensex and the Nifty 50.

The Nifty Bank and Nifty Financial Services indices jumped almost 2 per cent after the Reserve Bank of India (RBI) announced a set of forex and money market measures that will collectively infuse ₹1.5 trillion over time.

The RBI said it will purchase government securities (G-Secs) worth ₹60,000 crore through open market operations (OMOs) in three tranches of ₹20,000 crore each. The OMO auctions will take place on 30 January and 13 and 20 February.

2. Rebound in an oversold market

After two sessions of losses, experts expected the market to rebound. Most experts believe that the recent fall in the Indian stock market is an opportunity to buy quality stocks due to the long-term structural growth story of the Indian economy.

“The markets have demonstrated resilience, supported by robust investor participation and improving fundamentals. Valuations are not at extremes and continue to be supported by healthy corporate earnings, strong ROEs, and low FII holdings. Any short-term volatility is likely to be offset by the long-term structural growth story of the Indian economy,” Anil Rego, Founder and Fund Manager at Right Horizons, told Mint.

3. Fair valuation of large-caps

The Nifty 50 is now 12 per cent down from its all-time high. This significant correction has brought the market valuation to fair levels, triggering selective buying in large-caps on dips.

“After the correction, the market is trading at fair valuations aligning with long-term (10-year) averages. Investors can utilise the opportunity to buy fundamentally strong, high-quality stocks. The outperformance of largecaps over mid-and smallcaps is a healthy trend,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

4. Pre-budget rally

Investors’ focus is on the Budget 2025, which Finance Minister Nirmala Sitharaman will present on February 1. Expectations are rife that the government will maintain fiscal prudence and announce measures to boost consumption and economic growth.

“The Union Budget 2025 will focus on demand revival, economic expansion, and bolstering investor confidence. Measures to support private investment, such as incentives under PLI schemes and public-private partnerships, are also expected. Some pro-growth policies and clarity on long-term taxation could stabilise stock market sentiment, provided the fiscal deficit is managed effectively,” Narinder Wadhwa, Managing Director & CEO of SKI Capital, told Mint.

5. Technical factor

Osho Krishnan, Senior Technical and Derivatives Analyst at Angel One, pointed out that the support near the sloping trendline of ‘Falling Wedge’ seems to have significance.

“On the levels front, 22,800 remains the critical support zone on an immediate basis. On the flip side, 23,100-23,150 seems to be the intermediate hurdle, while formidable resilience is seen around 23,350-23,400, breaching which could only provide some thrust to the bullish sentiment in the markets,” said Krishnan.

“The Nifty remained volatile throughout the session before closing below 23,000, reinforcing bearish sentiment in the market. In the near term, the index is likely to remain under bearish control as long as it stays below 23,000 on a closing basis,” said Rupak De, Senior Technical Analyst at LKP Securities.

“On the downside, immediate support is placed at 22,800, and a breach below this level could lead to a decline toward 22,500. Conversely, a close above 23,000 might provide some short-term relief to the market,” said De.

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