The BSE Sensex climbed 186.10 points (0.25%) to 6,087.51, while the Nifty 50 advanced 58.20 points (0.25%) to 23,015.45. Investor sentiment remained positive despite concerns about foreign institutional investor (FII) outflows and the upcoming US Federal Reserve policy review.

Why Is the Stock Market Rising?

The recent pause in the US dollar rally and bond yield increase has provided relief to global markets, including India. Analysts expect no major shift in policy from the US Federal Reserve, which has strengthened investor confidence.

Additionally, market participants are keeping a close eye on the Union Budget 2025, which may introduce key policy changes impacting various sectors. Despite Rs 71,536 crore worth of FII outflows in January, the domestic market has shown resilience, supported by fairly valued financial stocks.

Sectoral Highlights and Stock Movements

• ITC Hotels Listing: Expected to list in the Rs 140-175 range. Analysts believe that the holding company discount will limit major gains for ITC shareholders.
• Suzlon Energy: Hit its 5% upper circuit at Rs 52.76. Nuvama Institutional Equities upgraded Suzlon from 'Hold' to 'Buy' due to valuation comfort.
• Midcap & Smallcap Performance: Nifty Midcap is down 9.1%, while Nifty Smallcap has declined 14.71% in January.

Market Outlook: What’s Next?

Experts believe that the recent correction in overvalued stocks is a healthy sign for the market. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated that a sharp rally is unlikely due to FII selling at higher levels. However, positive cues from the Union Budget could provide market direction.

Meanwhile, Morgan Stanley's sentiment indicator has entered the buy zone for the first time since mid-2022. The firm noted that declining trading volumes suggest a lack of aggressive selling rather than forced liquidation.

Conclusion

The Indian stock market remains at a crucial juncture, influenced by both global and domestic factors. While short-term volatility may persist, long-term investors should focus on fairly valued financial stocks and key announcements from the Union Budget 2025.

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