The Indian stock market is witnessing healthy buying interest, as an India-US trade deal, the return of foreign institutional investors (FIIs), and easing geopolitical tensions boost market sentiment.
The Nifty 50 is getting closer to the 26,000 mark, while the Sensex has risen over 1,000 points to hover near 84,400. At present, both key indices are just about 2% below their record high levels. Experts say if the momentum sustains, the benchmarks may hit all-time highs sooner than expected.
Key factors that can drive the Sensex, Nifty 50 to record highs
Experts highlight the following five factors that can drive the key indices to their record high levels in the next few days:
1. Strong foreign capital inflows
After selling Indian stocks in the cash segment for seven consecutive months from July to January, FIIs have turned net buyers in February. As per available data, FIIs have bought Indian stocks worth ₹4,900 crore in the cash segment in February till the 9th.
FIIs are expected to remain net buyers in the near term, supported by a weaker dollar, expectations of further rate cuts by the US Federal Reserve, and attractive valuations in Indian large-cap stocks.
Moreover, FIIs remain heavily short in the derivatives segment, raising the possibility of short covering as the rupee strengthens and India’s macroeconomic outlook improves.
2. Market discounts solid macro
India’s growth outlook has improved further following the Union Budget, which maintained a balance between growth and inflation. India’s trade deals with the United States and the European Union, too, have augmented the macro outlook of the country.
“A significant macro development is the turnaround in private capex, which has been sluggish for years. The H1FY26 numbers of a sample of listed companies compiled by BS show a 13.1% YoY increase in fixed assets. This is a clear indication of acceleration in private capex, and this data is complemented by the recent uptick in bank credit,” VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, noted.
“These macro developments can lead to GDP growth of above 7% and with inflation rising to the expected 4% in FY27, this can translate into nominal GDP growth of around 10.5 % and corporate earnings growth of above 16%. The market will start discounting these positive developments, particularly since the US-India trade deal is no longer a constraint for the market,” said Vijayakumar.
3. Rupee’s improving health
The rupee remains below the 91 mark per dollar, which experts find not a level to fret on. They expect the Indian rupee to stabilise, going further, which can attract more foreign capital to the Indian market.
“An important factor that changed the market sentiment was the appreciation in the rupee from a record low of 91.72 to 90.30 to the dollar. INR is expected to stabilise and gradually appreciate to below 90 to the dollar by the end of March 2026. This has the potential to trigger more FII inflows into India,” said Vijayakumar.
4. Trade deals boost sentiment
Experts highlight that India’s trade deal with the US has removed a key overhang from the market. The current momentum is expected to sustain for the next few days, potentially driving the key indices to record highs.
“An amicable trade agreement with the largest economy in the world and the largest economic bloc (the Eurozone) is a remarkable development for both the Indian markets and the Indian economy. Both the US and the Eurozone are also the largest export markets for India’s goods and services combined. Therefore, the rupee may strengthen further, and FPIs are likely to return to the Indian equity markets in the short term itself,” said G. Chokkalingam, Founder and Head of Research, Equinomics Research Private Limited.
5. Retail buying
Improving macro outlook, expectations of earnings growth and sharp volatility in gold and silver prices are expected to drive retail investors to equities.
Experts expect earnings to see significant improvement from Q1FY27 due to trade deals, an uptick in nominal GDP and a stronger rupee.
“A sustainable market recovery will require earnings revival. Earnings revisions have been stable with balanced upgrades and downgrades, suggesting troughing in earnings
going forward. The trade deals can help earnings in the medium term by removing uncertainty and bringing growth and expansion plans back into focus,” according to SBI Mutual Fund.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
