Indian equity markets extended their impressive rally for a third consecutive session on Monday, with key benchmarks recording significant gains. The 30-share BSE Sensex surged by 1,233.25 points, or 1.66 percent, to close at 75,692.78. Similarly, the NSE Nifty index advanced 387.70 points, or 1.68 percent, settling at 23,440.80.
This sustained upward momentum substantially increased investor wealth. The total market capitalization of BSE-listed companies rose by approximately Rs 7.92 lakh crore, reaching Rs 482.29 lakh crore compared to Rs 474.37 lakh crore in the prior session.
Key Drivers Behind the Market Rally
Several factors contributed to the robust performance of the Indian equity markets. Ajit Mishra, SVP – Research at Religare Broking, highlighted favorable global cues, a softening in crude oil prices, and encouraging corporate earnings as primary catalysts for investor sentiment.
Mishra noted that Brent crude prices eased towards $110 per barrel from a recent high of around $118. This decline was attributed to renewed diplomatic discussions involving Iran and Qatar, which raised hopes for de-escalation in West Asia and alleviated concerns regarding potential supply disruptions. Beyond global factors, strong corporate earnings reports and renewed interest from foreign investors also bolstered market confidence.
Sectoral Performance and Broader Market Participation
On the sectoral front, energy, metal, and automobile stocks led the charge, recording notable gains. Conversely, IT and pharmaceutical shares ended the day in negative territory. The broader market also participated actively in the rally, with midcap and smallcap indices climbing between 0.71 percent and 1.19 percent.
Proposed Capital Gains Tax Relief Boosts Sentiment
Investor sentiment also received a significant boost from reports suggesting potential capital gains tax relief for foreign investors. The Securities and Exchange Board of India (Sebi) has reportedly recommended to the government the removal of the long-term capital gains (LTCG) tax imposed on foreign investors. Additionally, Sebi has proposed tax relief for domestic mutual fund investors, suggesting an exemption from LTCG tax when they sell existing mutual fund holdings to reinvest in new schemes.
Global brokerage firm Jefferies, in a recent analysis, indicated that any reduction in capital gains taxes would likely enhance the attractiveness of Indian markets for foreign investors and support portfolio inflows. Currently, investors face a 12.5 percent LTCG tax on securities held for over a year and a 20 percent short-term capital gains tax, in addition to securities transaction tax (STT) and withholding taxes on dividends.
Raamdeo Agrawal, Chairman and Co-Founder of Motilal Oswal Financial Services (MOFSL), commented, "If and when this happens, it is likely to be viewed largely as a positive development. However, we will have to wait for the final announcement, which could form part of the Budget, as its presentation is about two months away."
Nifty Outlook and Future Resistance
Looking ahead, Nandish Shah, Deputy Vice-President at HDFC Securities, provided an outlook for the Nifty index. "For Nifty, 23,175 is now likely to act as immediate support. With momentum turning positive, the index is now heading toward the next resistance zone of 23,500–23,600. A sustained move above this band could open the door for further upside, while holding above 23,175 would keep the bullish bias intact," Shah stated.