Sensex Soars Above 700 Points - Why Is Stock Market Rising Today?

India’s stock markets witnessed a sharp rally on Friday, with the BSE Sensex jumping 728.08 points to reach 82,089.95, and the Nifty50 breaching the 25,000 mark, buoyed by a regulatory boost from the Reserve Bank of India (RBI). The central bank’s move to ease provisioning norms for under-construction infrastructure projects ignited strong gains across banking, financial, and infrastructure sectors.

The RBI's revised guidelines allow banks and non-banking financial companies (NBFCs) to set aside lower capital reserves for loans extended to infrastructure projects that are still under construction. This policy shift is expected to enhance credit flow into critical sectors such as power, transport, housing, and railways, which have long suffered from funding constraints.

“The easing of provisioning norms will free up capital and allow financial institutions to lend more aggressively into infrastructure,” said Koustav Das, a financial analyst based in New Delhi.

The market's response was swift and emphatic, with key infrastructure financiers like Power Finance Corporation, REC Ltd, and IRFC witnessing strong intraday gains. Other major gainers included Jio Financial, Shriram Finance, Mahindra & Mahindra, and JSW Steel, while large-caps like Reliance Industries and State Bank of India also climbed between 1 and 2 per cent.

Financial Stocks Lead Rally, But Volatility Lingers

The rally comes amid a volatile trading week, especially in small- and mid-cap (SMID) stocks, which have seen corrections of up to 2 per cent. Broader sentiment remains cautiously optimistic, but there is still downside risk from overvaluation and global headwinds.

“While the Nifty has stabilised near the 25,000 mark, the breakout on the upper side will only happen if there’s de-escalation in geopolitical tensions, especially in the Israel-Iran conflict,” said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Dr Vijayakumar also warned investors against excessive exposure to high-valued small and mid-cap stocks, advising a more defensive strategy focused on fairly valued large-caps in sectors such as financials, industrials, automobiles, and real estate.

Macro Caution: Oil Prices, Trade Tensions

Despite the bullish tone driven by the RBI’s announcement, global factors continue to cast a shadow. Crude oil prices, if they breach $85 per barrel, could dampen sentiment and test the lower range of the current market rally. Moreover, U.S.-China trade talks and broader macroeconomic uncertainty remain unresolved, adding to investor wariness.

The rupee remained steady, while the U.S. dollar tried to recover after recent losses, amid ongoing diplomatic tension between Washington and Beijing.

Infrastructure Push: A Strategic Shift

The RBI’s policy change is seen as part of a broader strategy to stimulate long-term economic growth through enhanced infrastructure development, which remains a cornerstone of India’s structural transformation.

With the central government pushing for massive capital expenditure in sectors like transport and energy, Friday’s announcement is likely to improve liquidity and support project financing—long a bottleneck in India’s growth narrative.

Market participants are optimistic that this policy move, combined with strategic domestic institutional buying, will strengthen market resilience, even as they brace for external shocks.

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