RECORD HIGHS, REAL RISKS

The Indian stock market's recordbreaking surge yesterday, with the Sensex touching 86,026 and the Nifty 50 climbing to 26,306, was not a flash in the pan but the result of several converging forces that simultaneously strengthened investor sentiment.

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The early rally, which softened by midmorning, demonstrated the coexistence of exuberance and caution that defines India’s equity markets today. Expectations of a rare synchronised rate cut by both the US Federal Reserve and the Reserve Bank of India in December have powerfully shaped the market mood. A 25-basis-point cut by the Fed would signal a pivot from its long inflation battle, likely weakening the dollar and making emerging markets like India more attractive for foreign investors. A similar cut by the RBI would improve domestic liquidity, stimulate credit, and strengthen corporate balance sheets, setting the stage for stronger demand. This macro backdrop has coincided with the tentative return of foreign institutional investors, who have been net buyers over the last two sessions, including nearly ₹4,800 crore inflows on November 26. Lower valuations in large-cap stocks, stabilising crude oil prices, and a softer dollar index have made India an appealing market again, though uncertainties around an India-US trade deal remain. The combination of cheaper money, renewed foreign interest, and India’s resilient macro fundamentals has created a buoyant environment that propelled both the Sensex and Nifty to new peaks even as midand small-caps saw profit booking and remained largely flat for the day.