The Indian stock market witnessed strong buying in morning trade on Thursday, 15 October, with the benchmarks, the Sensex and the Nifty 50, jumping more than 1% each even as the mid- and small-cap segments remained lacklustre.
The 30-share pack jumped nearly 1,200 points, or 1.6%, to its intraday high of 73,954, while the Nifty 50 climbed over 300 points, or 1.5%, to its day’s high of 22,960. On the other hand, the BSE 150 Midcap index and the BSE 250 Smallcap index dropped by up to 0.80% during the morning session.
Why is the stock market up today?
Let’s take a look at three key factors behind the rise in the Indian stock market:
1. Buying in blue-chips
Investors are turning to blue-chip stocks as valuations become more comfortable. The shift towards large-caps also reflects their relative safety compared with mid- and small-caps, amid persistent geopolitical uncertainties that continue to cloud the market outlook.
Around 10:15 AM, Bharti Airtel, ICICI Bank, HDFC Bank, Reliance, Infosys, and TCS were the top contributors to the gains in the Sensex.
2. Selloff in AI stocks
South Korea’s Kospi crashed 8%, and Taiwan Weighted declined 4% as the selloff in AI-themed stocks deepened. MSCI Inc.’s Asia Pacific equities declined 1.5%, heading for a fourth straight decline, reflecting growing investor concerns about a potential slowdown in artificial intelligence stocks amid stretched valuations.
A lack of AI trade has been among the key factors behind the underperformance of the Indian stock market for the last one year. While key indices in Taiwan and South Korea have jumped 60% and 30% year-to-date, respectively, Nifty is down 12% in the same period.
Now, the market is anticipating a reversal of the AI trade, which could drive foreign investors into the Indian market, offering alternative themes amid a resilient economy.
“From the Indian market perspective, the correction in AI stocks is a positive. FIIs who have been selling Indian stocks and buying AI stocks will halt this trend and, under favourable conditions, might even reverse IT,” said V K Vijayakumar, Chief Investment Strategist, Geojit Investments.
3. Healthy start of Q2 earnings
The healthy start of Q2 earnings is another key factor behind the rise in the stock market. While intermittent profit booking persists due to higher oil prices, elevated bond yields in the US, and foreign capital outflow, investors are buying the dips selectively.
IT majors TCS and HCL Tech reported better-than-expected earnings and signalled the situation was gradually improving, even as concerns persist.
The Nifty IT index has jumped over 9% in just three consecutive sessions, including Thursday.
“The strength in the IT stocks following the results of HCL Tech and the optimism surrounding that will hold the IT index strong. The expected good Q2 results from financials can impart resilience to the market,” said Vijayakumar.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.