Stock market today: Sensex jumps 500 points; what drove the Indian stock market higher today? Explained with 5 factors

Stock market today: After a sharp decline of about 5 per cent over the previous five consecutive sessions, the Indian stock market benchmarks — the Sensex and the Nifty 50 — witnessed a relief rally as they jumped over 1 per cent in intraday trade on Monday, December 23.

Sensex opened at 78,488.64 against its previous close of 78,041.59 and jumped as much as 877 points, or over 1 per cent, to the level of 78,918.12. The Nifty 50 opened at 23,738.20 against its previous close of 23,587.50 and jumped nearly 300 points, or over 1 per cent, to the intraday high of 23,869.55.

The indices, however, pared gains. The Sensex closed 499 points, or 0.64 per cent, up at 78,540.17, while the Nifty 50 settled 166 points, or 0.70 per cent, up at 23,753.45.

Mid and smallcap segments underperformed. The BSE Midcap index rose 0.10 per cent, but the Smallcap index declined 0.60 per cent.

The overall market capitalisation of the BSE-listed firms jumped to ₹442 lakh crore from ₹441 lakh crore in the previous session, making investors richer by over ₹1 lakh crore in a single session.

Sectoral indices today

Several sectoral indices clocked healthy gains on Monday. Nifty Bank, PSU Bank and Realty indices jumped over a per cent. The Nifty Private Bank, Financial Services, FMCG, Consumer Durables, Metal and Oil & Gas indices rose almost a per cent each.

Why drove the Indian stock market today?

Let's take a look at five key factors that drove the Indian stock market higher:

1. Value buying

Experts pointed out that investors are buying large-caps stocks after the recent correction as they remain positive about the prospects of the Indian stock market for the medium to long term.

When the stock market significantly corrects, investors start looking for undervalued stocks. These stocks have strong fundamentals—such as solid growth prospects, strong earnings, low debt, and consistent cash flow—but are trading at a price lower than their fair value.

2. Positive global cues

Strong gains in Wall Street and other major Asian markets influence sentiment back home. The rally in the US and Asian markets could be largely attributed to softer US inflation numbers.

According to Reuters, “the Commerce Department's report on Friday showed that prices rose moderately last month, with a measure underlying inflation recording its smallest increase in six months.”

Moreover, investors felt relieved that the US had averted a government shutdown.

As Reuters reported, the US Congress passed spending legislation early on Saturday that will avert a destabilising government shutdown ahead of the Christmas holiday season.

3. Smart gains in heavyweight stocks

Gains in select heavyweight stocks boosted equity benchmarks on Monday. Some heavyweight stocks, such as ITC, HDFC Bank, and Reliance Industries, rose 1-2 per cent, contributing significantly to the gains in the Sensex and the Nifty 50.

Meanwhile, the Nifty Bank index jumped over a per cent to close at 51,317.60, with 11 stocks up and one stock- Kotak Mahindra Bank- down with marginal losses of 0.09 per cent. Banking stocks carry a significant weight in the Sensex and the Nifty, so their gains contributed to the overall recovery in the frontline indices.

4. Hopes of policy support

Experts say that the market has digested the revised interest rate outlook of the US Fed and is now looking at the Reserve Bank of India's monetary policy and the Union Budget 2025 for policy support.

"There is hope that the government will accelerate its capital expenditure. The government has been doing that since August. Also, we expect some sops in the Budget, which can be followed by a 25 basis point rate cut by the Monetary Policy Committee (MPC) of the RBI since we have the new RBI Governor. These two expectations seem to have improved the sentiments a bit," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"The US Fed's revised rate cut outlook has been digested. The positive factor is that there can be further surprises because the latest inflation numbers were lower than expected, and if this declining trend continues, the Fed may cut interest rates even three times, not just two times. The unexpected factor is there very much," said Vijayakumar.

5. Technical factors

Anand James, Chief Market Strategist at Geojit Financial Services, observed that with the threat of low volumes looming for the last week of the year, Nifty was expected to attempt a pullback above the 200-day SMA (simple moving average) at 23,837.

Shrikant Chouhan, the head of equity research at Kotak Securities, pointed out that the Nifty 50 formed an inside body candle on the daily charts, which indicates indecisiveness between the bulls and bears.

"We believe that non-directional activity is likely to continue in the near future; hence, level-based trading would be the ideal strategy for day traders. For traders now, 23,650 and 23,550 will act as key support zones, while the 200-day SMA or 23,850 and 24,000 could serve as key resistance areas for the bulls," said Chouhan.

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