Premium

Market extends rally, surges 0.93% as FII selling eases and DIIs buy; Small-caps recover

Led by the 2.6 per cent gain in RIL, the Sensex rallied by another 0.83 per cent to reclaim the 74,000 level at 74,340.09 and Nifty Index rose by 0.93 per cent to 22,544.70 on Thursday.

Insurance companies like LIC and fund houses which are flush with funds are expected to mop up stocks at rock-bottom valuations in several segments. (Express File Photo)

After the 1 per cent gain on Wednesday, stock markets continued their upward momentum on Thursday, rising by 0.93 per cent as the selling pressure from foreign institutional investors (FIIs) subsided and domestic institutional investors (DIIs) remained net buyers, snapping up battered stocks at attractive valuations. In a notable reversal, small-cap stocks, which had borne the brunt of heavy selling in recent weeks, regained some lost ground. This resurgence suggests that investors are beginning to capitalise on the attractive valuations in the large-cap and small-cap segments.

DIIs, led by insurance companies, have purchased stocks worth Rs 17,000 crore in March so far while FIIs pulled out Rs 13,466 crore in the last four sessions. While on March 3, FIIs sold Rs 4,788 crore stocks, their sales came down to Rs 2,895 crore on March 5 and Rs 2,377 crore on March 6. DII investments in domestic-oriented sectors after heavy selling provided some stability, said an analyst with a brokerage.

Led by the 2.6 per cent gain in RIL, the Sensex rallied by another 0.83 per cent to reclaim the 74,000 level at 74,340.09 and Nifty Index rose by 0.93 per cent to 22,544.70 on Thursday.

Story continues below this ad

Battered small-cap stocks also gained ground on Thursday with the small-cap Index rising by 1.63 per cent. The BSE Mid-cap Index rose by 0.65 per cent.

The broader market sentiment has now pivoted toward a bullish bias, suggesting the potential for continued upside momentum. “The Nifty index has carved out a solid base around its psychological support of 22,000, with 22,200 serving as a critical buffer. Each minor dip is being countered by aggressive buying, effectively warding off any substantial downside. The swift recovery, driven by short covering from sellers, underscores the bullish strength,” said Dhupesh Dhameja, derivatives analyst, SAMCO Securities.
Analysts said a decisive breakout above 22,700 is crucial for sustaining the rally, as lingering call writing and technical hurdles could pose challenges. “Given the promising turnaround and improved market sentiment, adopting a ‘Buy on Dips’ strategy appears prudent,” Dhameja said.

On Thursday, metal, energy, and pharma led the gains, while realty and IT remained subdued. The broader indices traded mixed, though a recovery in the small-cap segment resulted in strong market breadth.

“The recent cool-off in crude oil and the dollar, along with the potential negotiations on US tariffs, has improved global sentiment and fuelled this rebound,” said Ajit Mishra, senior VP, Research, Religare Broking Ltd.

Story continues below this ad

Insurance companies like LIC and fund houses which are flush with funds are expected to mop up stocks at rock-bottom valuations in several segments. “We had seen retail investors always missing out the bottom level in the previous corrections. They start looking at stocks when the markets have already bounced back and shares rise sharply again,” said an analyst with a brokerage.

Further, high networth investors and family offices which were sellers in the last four months are likely to return to the market as valuations have become cheaper. The sharp correction in the broader market has made the valuations in certain segments attractive.

In FY25, so far, FIIs have sold stocks in the cash market for Rs 3,87,976 crore. Interestingly, DIIs have more than compensated for this selling through buying for Rs 5,55,519 crore. This means DIIs have acquired the stocks when the market was witnessing the sell-off in the last five months. They are expected to make a good profit in the process.