Synopsis: NIFTY 50 is really close to touching its all-time high, surrounded by many factors such as positive developments on the India-US Trade deal, geopolitical events, expectations of further rate cuts, etc
NIFTY 50 touched an all-time high of 26,277 points on 27 September 2024. And now, NIFTY is currently trading at 26,102 points, which is just 175 points or 0.66 percent away from hitting its all-time high. In this article, we will dive into the details of what factors could make a rally in the market.
Factors to watch out for
India-US Trade Deal: According to reports, a pact between the US and India might be made public very soon, which may result in reduced American tariffs on Indian products from the existing 50 percent to roughly 15-16 percent, maybe as early as the next ASEAN summit.
Indian firms, which have high export exposure to the US market, would be the ultimate beneficiaries of this initiative. Just one of the reasons for those high US tariffs was India’s high imports of Russian oil, out of which nearly 34 percent of its crude is from Russia, and only 10 percent is from the US. India intends to lessen its reliance on Russian crude bit by bit, thus avoiding a sudden disruption and global price volatility.
Fed Rate Cut & Cooling US Inflation: US inflation has begun easing again, with the Consumer Price Index (CPI) rising 3 percent in September, signalling gradual cooling. In response to the weakening labour market and slower economic momentum, the Federal Reserve recently cut rates by 25 bps, bringing the policy range to 3.75–4 percent. The Federal Reserve might be inclined to cut the rates further one more time in 2025 and 2026, as it is already suffering from slow employment growth.
When interest rates in the US go down, the yields on bonds become less attractive for investors. As a result, foreign institutional investors (FIIs) seek other opportunities in emerging markets such as India, where their returns could be higher.
Improving Geopolitical Scenarios: Markets have been benefiting from a de-escalation of global geopolitical conflicts. A ceasefire, negotiated by the U.S., between Israel and Hamas in the Middle East has calmed the situation and also includes the release of hostages. Russia, on the other hand, has responded to the ceasefire with a cautious welcome.
In the same way, in Eastern Europe, Ukraine has agreed to a temporary ceasefire suggested by the U.S. with Russia along the current front line, thus opening the door to wider peace negotiations. This good news is relieving investor fear and can be a source of a more stable market outlook, Indiaincluded.
Improving Corporate Earnings: The earnings of corporations are becoming more and more positive, which is attracting the confidence of investors to the market. For example, HUL disclosed its Q2 FY26 results and mentioned that it anticipates H2 of FY26 to be even more productive than H1, thus implying accelerated growth in the future.
Such a trend of earnings getting better across various firms can be a reason for market rallies to sustain. The logic behind this is that higher profits create the possibility for more investments, increasing stock prices and overall positive sentiment in the economy.
Robust SIP Inflows
The mutual fund sector is still vibrant with significant retail participation, as evidenced by the steady rise in SIP inflows. The SIP inflows were up 1 percent month-on-month to Rs 29,529 crore in October as against Rs 29,361 crore in September. The SIP AUM has also gone up to Rs 16,25,305 crore, which is a whopping 20.3 percent of the total assets of the mutual fund industry.
Such regular retail liquidity serves as a strong cushion for the market, thereby helping in index stability and ensuring a steady inflow of long-term capital, which is one of the main factors behind NIFTY’s being able to sustain its level close to the record high for a long time.
In summary, NIFTY 50 is almost at its highest level ever of 26,277 points, and there are many reasons why the index could go beyond that level. The market environment would be very supportive of the equity market if such factors materialize as a trade deal between India and the US, rate-cut expectations in the U.S., geopolitical tensions easing, prices of gold and silver falling, and corporate earnings improving.
It means that the NIFTY 50 index could be seen going to or even beyond its all-time high level if these scenarios were to follow through, thus business growth getting stronger, foreign investments increasing, and general market sentiment turning positive.
Written by Satyajeet Mukherjee
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