Diwali fireworks on D-Street: Sensex rises over 1,000 points; top reasons for rally

FIIs have remained net buyers of Indian stocks on every trading day so far this week.Stock market today: Nifty50 and BSE Sensex continued to defy global market trends on Friday, extending their winning streak for the seventh consecutive session. The Sensex surged over 1,000 points, while the Nifty climbed past 24,700 during Friday’s session as early Diwali fireworks went off on Dalal Street.At 1:36 PM, Nifty50 was trading at 24,747.40, up 211 points or 0.86%. BSE Sensex was at 80,336.05, up 1,026 points or 1.29%.Global equities suffered a sharp sell-off amid fading enthusiasm for artificial intelligence (AI) stocks following US President Donald Trump’s defeat in the midterm elections.The rally in frontline stocks contrasted with a sharp decline across the broader market. The Nifty Smallcap 250 index dropped nearly 1.5%, while the Nifty Midcap 100 index lost more than 1% on Friday morning. Market breadth on the NSE consequently turned negative, with 2,236 stocks declining against 937 advancing, while 99 remained unchanged.Why is stock market rallying today?FIIs are back D-StreetForeign institutional investors (FIIs) stepped up their purchases of Indian equities on Thursday, recording net buying worth Rs 14,975 crore, according to provisional data from the NSE. This was their largest single-day net investment in many years, as global investors shifted money away from AI-linked trades.FIIs have remained net buyers of Indian stocks on every trading day so far this week. Their buying activity gathered pace in November, although signs of a change in sentiment had emerged in the second half of October.Hopes of relief on the long-term capital gains (LTCG) tax front have also brought back investors.Global AI stocks tumbleArtificial intelligence-linked stocks came under heavy selling pressure amid fears of stricter regulation after the Democratic Party defeated President Donald Trump’s Republicans in the US midterm elections, securing control of Congress.The outcome raised concerns that tighter oversight of the AI industry could slow the expansion of AI infrastructure, a key factor behind the stock market rally that has pushed equities to record highs this year.The Nasdaq plunged 6%, marking its steepest decline since the infamous Covid-19 market crash in March 2020. The technology-heavy index also entered correction territory, defined as a fall of 10% from its record closing high on October 6.South Korea’s Kospi, which had come to symbolise the sharp swings associated with the AI-driven market frenzy, was also hit hard. The index plunged more than 9%, triggering a circuit breaker.The global sell-off in AI stocks has, in turn, supported sentiment towards Indian equities, which analysts believe have an ‘anti-AI’ advantage. Veteran banker Uday Kotak recently said he expects India to benefit from the reversal of investment flows as enthusiasm for AI stocks wanes, while the country continues to develop its own AI capabilities.Large-cap stocks riseThe sharp gains on Dalal Street this week follow an extended period of selling that has weighed on investor portfolios since the start of the year. Despite the recent recovery, the Sensex and Nifty continue to trade well below their respective record highs.The decline in stock prices has prompted analysts to highlight attractive valuations across several large-cap companies.Better-than-expected earnings Mahindra & Mahindra (M&M) emerged as the biggest gainer on the Sensex, with its shares climbing more than 5% after the automaker reported strong second-quarter earnings.Nomura reiterated its preference for M&M, retaining the company as its top pick and highlighting its strong pipeline of new launches scheduled for 2027. The brokerage said the company's second-quarter performance was broadly in line with its estimates.The ongoing earnings season has delivered results that have generally exceeded expectations, providing additional support to the market rally.“It is important to recognise the fact that this ongoing rally has fundamental support from impressive earnings growth which has come better-thanexpected,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)