On February 4, Indian stock markets experienced a strong rally as the Sensex and Nifty surged following positive global cues and optimism surrounding a potential rate cut by the Reserve Bank of India. The Sensex opened at 77,687.60 and gained over 700 points to reach 77,952, while the Nifty 50 opened at 23,509.90 and rose nearly 1% to 23,582. Mid-cap and small-cap stocks also posted gains, contributing to an overall bullish sentiment in the market.

Investor confidence was boosted by gains in major Asian indices, including Japan's Nikkei, Korea's Kospi, and Hong Kong's Hang Seng, all of which saw over 1% growth. This uptick followed recent shifts in US trade policy, particularly the temporary pause on tariff hikes against Mexico and Canada. By reducing global trade tensions, this decision encouraged stronger risk appetite across international markets, influencing sentiment in India’s equity markets.

Further supporting the rally, expectations of a potential 25 basis points rate cut from the RBI during its upcoming Monetary Policy Committee (MPC) meeting between February 5-7 have fueled optimism. Analysts believe that monetary easing could stimulate economic growth, reinforcing investor confidence in key sectors. As a result, financial markets responded positively to expectations of liquidity support from the central bank.
 

Valuation Metrics, Technical Support, and Market Capitalisation Growth
 

With the Nifty 50 declining 11% from its recent peak, analysts noted that several large-cap stocks have become more attractive from a valuation perspective. While some metrics suggest stretched valuations, investors are finding renewed interest in large-cap stocks due to lower entry points. The correction in stock prices has provided an opportunity for long-term investors to enter the market at relatively cheaper levels, strengthening demand for fundamentally strong stocks.

On the technical front, the Nifty 50 has demonstrated strong support at the 23,200 level, maintaining its upward momentum. Analysts have identified resistance levels at 23,400 and 23,800, indicating potential volatility in the short term. Traders are closely monitoring these levels to assess further market movements and potential breakouts in key indices.

Another crucial indicator of market optimism is the increase in market capitalisation. The total market capitalisation of BSE-listed firms rose by ₹4.5 lakh crore, signaling significant wealth creation among investors. This increase reflects strong institutional participation and retail investor confidence, further bolstering market stability.

As global economic developments and central bank policies continue to shape market movements, investors are advised to keep a close watch on upcoming announcements. The RBI's rate decision, global trade negotiations, and ongoing market trends will determine the direction of the equity markets in the coming weeks. While the current surge reflects renewed optimism, market participants remain cautious of short-term volatility and external economic factors.