The Nifty and Sensex Rally Is Real but Selective

NIFTY AND SENSEX GAIN NEARLY 7.5% IN SIX DAYS

The market rally in the last 6 trading sessions has raised the question once again; is this rally for real? It has been a really sharp rally going by the look of it. Just look at the Nifty and Sensex movement over the last 6 trading sessions.

Over the last 6 trading sessions starting from 28-October, the Nifty has rallied by 1,662.20 points, while the Sensex rallied by 5,496.78 points. A rally of 7.32% to 7.50% in a span of just 6 days does not happen on a regular basis. While these may be early signals and we need to await more confirmation, we may be sitting on the cusp of a selective long-term equity rally. Let us look at some interesting indicators and news flows.

FPI FLOWS HAVE TURNED POSITIVE

The good news is that FPI flows have turned positive. In the first 3 trading sessions of November, FPIs were net buyers of $1.57 billion. However, that is just part of the story. If you look at the break-up, of November, the buying has been entirely in the secondary equity markets, with little contribution from the IPOs. Also, in the second fortnight of October, FPIs were net buyers in equities to the tune of $1.38 billion, after they were net sellers of $(5.05) billion in the first fortnight of October. Clearly, the trend of FPI flows appears to have turned towards the positive side over the last 3 weeks.

OIL PRICES ARE DOWN SHARPLY

Between 30-Oct and 05-Nov, the price of Brent Crude is down from $117.64/bbl to $93.97/bbl, a sharp fall of -20.12% in a span of just 6 days. This has huge implications of India as imports account for nearly 90% of India’s daily crude oil consumption. In recent months, the demand for Indian diesel has grown across China and Europe and that has also spiked the demand for crude. Under these circumstances, oil falling by 20% is a blessing in disguise for the Indian economy.

DEMOCRATS SWEEP MID-TERM POLLS IN THE US

Why is the victory of the democrats so significant for India? With the Democrats getting a majority in the Senate and in the House, Trump will have a tough time pushing through bills. Also, he will have to use the veto power sparingly to ensure that he is able to survive the remaining 2 years of presidentship. For India, a win for the Democrats means an automatic cessation of hostilities in the Middle East. That will substantially reduce India’s shipping costs, which were adding another $20 to India’s landed cost of oil.

THE CONTRA-AI TRADE WILL BENEFIT INDIAN IT STOCKS

There was already a contra-AI trade going on as investors were getting worried about the ROI on AI investments. In 2026 alone, AI investments of the “Magnificent Seven” was close to $700 billion. Higher bond yields are expected to wipe out nearly $1.6 to $2.0 trillion from the market cap of these “Magnificent Seven” stocks. The clear beneficiaries would be IT and that was evident in FPIs buying Indian IT stocks worth $1.42 billion in October 2026. Being a heavyweight, that is likely to be positive for the indices too. (#)

GULF TRADE GETS SMOOTHENED FOR INDIA

A very important shift is that the Gulf Trade will now get smoother for India. Iran has allowed 4 countries preferential access through the Straits of Hormuz, which includes India. While India is able to source crude from other sources, the Straits of Hormuz remains critical for the supply of LNG. Normalizing of the Gulf region will also lead to a gradual reduction in the fertilizer subsidies, which is putting a lot of pressure on the Union Budget. Also, annual India-UAE trade is worth $101 billion and it is India’s third largest trading partner after China and the US. Clearly, a smooth Gulf transit means a lot to India.

A WORD OF CAUTION – IT WILL NOT BE AN ACROSS-THE-BOARD RALLY

A small safe harbour provision here! It is tough to expect a major Nifty or Sensex rally because India is already at around 125% Buffett Indicator ratio. That does not leave too much room for valuation moves. But, here is the take. US will be more rational on healthcare, so Indian CDMO players could have a field day. The US is likely to focus more on China Plus One. That opens opportunities from solar panels to battery chemicals, to specialty chemicals, to bulk drugs for India. Gas will flow easily from Qatar and that will be positive for gas-using industries.

The moral of the story is that the worst of the event risk of last 2 years may be history. From here it will be more about companies that gain from the dividends of peace.