India’s benchmark indices, Nifty 50 and Sensex, have posted their strongest weekly gains since February 2021, surging nearly 4% over the past week. This rally comes as a relief to investors after a sharp 14% correction from their September highs.
However, the standout performers of the week were Nifty Smallcap 250 and Nifty Midcap 100, which soared 8% and 7%, respectively, outpacing the broader market and highlighting renewed investor interest in mid- and small-cap stocks.
Market Outlook and Expert Insights
“We are transitioning from the excessive highs of the Nifty 50 to a more balanced market environment. However, calling it a bargain would be premature—it still requires time,” said Lakshmi Iyer, CEO–Investment & Strategy at Kotak Alternate Asset Managers. She emphasized that investors should begin selectively picking stocks rather than rushing into the market.
Despite the strong rally, experts caution against being overly optimistic as headwinds still outweigh tailwinds in the near term.
Currency Markets Boost Investor Sentiment
Adding to investor optimism, the Indian rupee strengthened to 85.97 against the US dollar, marking its best weekly performance in two years. The currency crossed the 86-mark for the first time since January, aided by stronger-than-expected trade data and an increase in foreign exchange reserves.
According to Dilip Parmar, Senior Research Analyst at HDFC Securities, the rupee’s appreciation was driven by foreign bank inflows and traders unwinding speculative long-dollar positions. The dollar index also stabilized at 104.1, making Indian equities more attractive to foreign investors by offering better conversion rates and reducing currency risk.
Foreign Investment on the Rise
A weaker dollar and a stronger rupee often lead to higher foreign inflows into Indian stocks, as they provide greater stability and more favorable returns for global investors. With these positive market movements, traders and analysts are closely watching whether this momentum can be sustained in the coming weeks.
