Bulls roar back: Nifty 50, Sensex post strongest weekly gain in 4 years | Stock Market News

India’s Nifty 50 and Sensex indices have logged their strongest weekly run since February 2021, gaining nearly 4% this week and offering much-needed relief for bargain hunters after plunging 14% from their September highs.

But the real stars were the Nifty Smallcap 250 and Nifty Midcap 100, which jumped 8% and 7%, outpacing their large-cap peers.

“We are moving from the suffocating highs of the Nifty 50 to more breathable territory. But is it a dirt-cheap bargain yet? Not quite—it still needs time,” said Lakshmi Iyer, chief executive officer–investment and strategy, at Kotak Alternate Asset Managers. “I think investors will have to start cherry-picking stocks.”

The markets will have their own trials and turning points but it’s important for investors to not get carried away by near-term factors as headwinds still outweigh tailwinds for now, she added.

Another spark of optimism for investors came from the rupee, which strengthened to 85.97 against the US dollar this week, while the dollar index weakened to 104.1.

The rupee strengthened past the 86 mark against the US dollar for the first time since January, said Dilip Parmar, senior research analyst at HDFC Securities, attributing this to stronger-than-expected trade data and a boost in foreign exchange reserves aided by the Reserve Bank of India’s US dollar/rupee swap intervention.

The local currency is set for its best weekly performance in two years, led by foreign bank inflows and traders unwinding speculative long-dollar positions, according to a Reuters report.

A weaker dollar index makes Indian stocks more appealing to foreign investors as they get better returns when converting profits back to dollars. Besides, a stronger rupee lowers currency risk, making India a more stable investment option, triggering higher foreign inflows into Indian equities.

Foreign institutional investors were net buyers of Indian equities in three out of five sessions this week, while domestic institutional investors remained net buyers except on Thursday and Friday, showed Bloomberg data.

Also read | “I wouldn’t be surprised if we start seeing positive FII inflows in March”

The big hitters

The market flows this week were largely influenced by FII money pouring into India ahead of the FTSE index reshuffle, said Abhilash Pagaria, head of Nuvama Alternative and Quantitative Research. “With the FTSE rejig scheduled for March 21, we anticipate around $1.2 billion in passive inflows into India on Friday alone,” he added.

The FII inflows were accompanied by short covering in heavily shorted sectors such as banks, oil marketing companies, realty, and auto, added Pagaria.

All sectoral indices on NSE closed in the green this week, with Nifty Realty leading the charge with a nearly 8% surge, followed by Nifty Media’s 7.6% gain and Nifty Healthcare’s 7.1%, according to Bloomberg data.

Nifty IT and FMCG scored the smallest gains—1.6% and 2.1%, respectively.

In terms of valuations, the Nifty’s price-to-earnings ratio is at 19.5 times for 2024-25 and at 17.1x for FY26, falling below its 10-year average of 22.8x and five-year average of 23.9x, as per Bloomberg data.

Emerging markets and tariff troubles

Indian equities also outshined their Asia-Pacific peers by a wide margin this week. While the Nifty 50 surged nearly 4%, Japan’s Nikkei edged up just 1%, South Korea’s Kospi gained 1.4%, and Singapore’s Straits Times added 2%. China’s Hang Seng and CSI 300 slipped 2% each, and Indonesia’s Jakarta Composite fell 3%.

Morgan Stanley Wealth Management said in a 3 March report that the US dollar’s movement could pave the way for a rebound in emerging markets (not including China) in the second half of the year, marking out Brazil, India, and Mexico as potential gainers.

However, over the past six weeks, foreign funds have been steering most of their emerging market flows towards China and Hong Kong, marking a clear shift in preference toward China after a long hiatus, according to a 21 March report by Elara Capital.

This week alone, foreign inflows into China hit $1.2 billion—the highest since October, following China’s quantitative easing announcement.

Meanwhile, outflows from India slowed, dropping to $194 million this week, compared to an average weekly outflow of $430 million since the start of the year. notably, redemptions from India-dedicated funds plunged to $54 million, from $350 million weekly average.

“Flows have shown some relief over the past two weeks,” Sunil Jain, vice president of derivatives and alternates at Elara Capital, said in the report.

That said, investors in Indian equities will be all ears for any remarks by US President Donald Trump on tariffs related to India, which he has said would become effective from 2 April.

Also read | Looming US tariffs could be bad news for India’s Big Five