Sensex Jumps Nearly 700 Points, Nifty 50 Reclaims 24,800: Reasons Behind the Surge and Sustainability Outlook

 The Indian stock market has been volatile, influenced by uncertainty over the US economy and mixed earnings. On May 23, the Sensex rebounded nearly 700 points, while the NSE gained almost 1 per cent in intraday trade. The BSE Midcap and Smallcap indices rose as well.

The Indian stock market has been on a volatile path recently, seeking direction amid heightened uncertainty over the US economy's trajectory, a fluctuating dollar, and mixed March quarter earnings.

A day after crashing over 600 points, the domestic equity benchmark, Sensex, jumped nearly 700 points in intraday trade on Friday, May 23. The NSE counterpart also witnessed smart gains of almost 1 per cent to reclaim the 24,800 level. The broader segment of the market also witnessed buying as the BSE Midcap and Smallcap indices rose about half a per cent during the session.

Why is the Indian stock market rising today?

There are no fresh positive cues for the Indian stock market at this juncture. At first glance, it appears that the domestic market is following the trend of "sell-on-rise and buy-on-dips".

The domestic equity market has been swinging between gains and losses. This lack of clear direction reflects the underlying uncertainty surrounding key global developments, including the progress of US-India trade negotiations, concerns about the US fiscal position, and fluctuations in currency markets.

The intermittent rise in the market can be attributed to short covering, as investors continue to see value due to prospects of healthy economic growth, an earnings revival, interest rate cuts, and a normal monsoon.

"At present, market momentum is largely driven by liquidity rather than fundamentals. Greater clarity is expected to emerge after the first and second quarters of the current financial year. By September, we may see a more defined trend as macroeconomic indicators and corporate earnings provide direction," said Avinash Gorakshakar, the head of research at Profitmart Securities.

Another factor that could be behind the market's gain is the weakness in the US dollar. The dollar index has declined by over 1 per cent this week, looking set to suffer its worst weekly loss since April 7. A weaker dollar can encourage greater foreign capital inflows to emerging markets like India.

According to global financial giant Morgan Stanley, the correction in the Indian stock market presents a compelling opportunity to invest in the country's long-term growth story.

Despite the near-term volatility, the medium to long-term outlook of the Indian stock market remains healthy, reflecting India’s macroeconomic stability amid global uncertainty and the strong influx of retail investors. This bright outlook encourages investors to accumulate quality stocks during market corrections.

In its latest outlook, Morgan Stanley has set a base-case Sensex target of 89,000 by June 2026, assigning a 50 per cent probability to this scenario. On the other hand, in the bull case, Morgan Stanley sees the Sensex reaching 1,00,000 by June 2026. However, Morgan Stanley sees a 20 per cent probability of a bear case in which the Sensex may drop to 70,000 by June 2026.