Will the Indian stock market continue its upward momentum this week? Here's what experts say

After experiencing significant volatility, the Indian benchmark indices resumed their upward momentum last week, with both the Nifty 50 and Sensex achieving their second-best weekly gains in 2024, led by favorable domestic and global factors.

Factors Driving the Market Upward

• Expectations of a US Federal Reserve Rate Cut: The market welcomed the anticipation of a rate cut from the US Federal Reserve last week, boosting investor confidence.

• Optimism Surrounding Monsoon Season: Forecasts indicating an earlier start to the monsoon season with expectations of above-average rainfall helped lift market sentiment.

• Strong Domestic Buying: Increased domestic buying activity contributed to the upward movement of the market.

• Improved Voter Turnout: The stability and improved voter turnout in the fourth phase of elections in India also had a positive impact on market sentiment.

• Stability in Crude Oil Prices: The stability in global crude oil prices provided a supportive environment for the Indian stock market.

• Record Highs in US Benchmark Indices: A boost was received from the US benchmark indices reaching record highs, which reflected positively on global market sentiments.

Surge in Metal Stocks

• China's Stimulus Package: China's announcement of a comprehensive stimulus package aimed at bolstering its distressed property market led to a significant surge in metal stocks.

• Nifty Metal Index Record High: The Nifty Metal index reached a record high of 9,633 points, reflecting strong bullish momentum in the metal sector.

FII and DII Activity

• Resilience in the Market: Despite considerable FII selling, the Indian stock market has shown resilience, with DIIs absorbing the majority of selling.

• Relative Stability in FII Debt Inflows: While FPIs have been selling in the equity markets, there has been relative stability in FII inflows into debt.

Expert Insights

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted the trend of FII outflows from expensive markets like India to cheaper markets like Hong Kong, while Sunil Damania, Chief Investment Officer at MojoPMS, pointed out the reasons for FPI selling and the high market valuations as critical factors influencing market behavior.

Market Outlook

Analysts anticipate continued volatility in the Indian benchmarks, with various factors such as quarterly results, election outcomes, and global economic data likely to impact market sentiment and trading activity.

Amidst ongoing uncertainties, experts maintain a positive long-term outlook for the Indian equity market, projecting strong returns over the next three to five years. While short-term volatility may persist, the overall market trajectory remains optimistic.