Nifty 50 and BSE Sensex posted their best weekly gains since April, driven by an 11.7% surge in the IT sector. While foreign investors continued to pull money out of Indian equities, domestic institutional support and positive news on AI revenue provided a lift. Investors are now focused on how upcoming quarterly earnings and global oil prices influence the recovery.
Indian stock markets staged a strong comeback last week, with the Nifty 50 and BSE Sensex climbing 2.77% and 3.11% respectively. This recovery marked the most significant weekly gain for the indices since April. The rally was primarily powered by the information technology sector, which saw an 11.7% jump—its strongest weekly performance in 18 years.
The sector's move was triggered by optimistic commentary from industry leaders, including Infosys, regarding artificial intelligence. Reports indicating that AI now contributes over 8% to the company's second-quarter earnings helped restore investor confidence. Many market participants view this as a potential sign that Indian tech firms could serve as a safer bet against the broader global market volatility often seen when AI-exposed stocks fluctuate elsewhere.
Despite the positive domestic sentiment, the market environment remains complex. Foreign institutional investors have maintained a selling streak for eight consecutive weeks, offloading nearly Rs 9,000 crore worth of equities. This consistent withdrawal by global investors has been a pressure point for the Indian market. However, the consistent buying by domestic institutional investors has acted as a crucial cushion, preventing a sharper decline and providing the liquidity needed to sustain the current upward movement.
Global macro factors continue to influence domestic indices. Persistent inflation data and fluctuating crude oil prices have created volatility in markets like Wall Street, which in turn impacts global investor appetite. Because India is a major importer of crude oil, rising prices often raise concerns about the country's import bill and potential impact on inflation, which investors are monitoring closely.
From a technical perspective, market breadth has improved, with a higher number of Nifty 50 stocks reaching new one-month highs. While this indicates that the rally is not limited to just a few companies, analysts note that indices are still trading below their 40-week average, suggesting that the trend is in a recovery phase rather than a clear long-term breakout. The current momentum has been supported largely by short-covering, where traders closed out their previous negative bets.
The most important factor for investors to track in the coming weeks will be the second-quarter earnings reports. These filings will provide the final proof of whether the optimistic growth projections for sectors like IT are backed by actual increases in profit and demand. Additionally, any major shifts in global crude oil prices or foreign investment flows will remain key areas of focus to determine if this rally can hold in the face of global economic uncertainty.