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Nifty reclaims 25,000: What is driving today's rally?

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  Published in Stocks and Investing on Monday, October 6th 2025 at 4:07 GMT by newsbytesapp.com
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Indian Equities Surging on a Bank‑Led Rally: Sensex and Nifty Touch Record Gains

The benchmark indices of the Indian stock market—BSE’s Sensex and NSE’s Nifty 50—rose sharply in early trading on Friday, recording some of their highest gains in months. The rally, which began in the pre‑market session and accelerated after midday, was propelled by robust buying in the banking sector, as major lenders such as HDFC Bank, ICICI Bank, and Kotak Mahindra Bank delivered fresh optimism for the earnings season.

Key Numbers

• Sensex closed up 1.54 % at 62,520 points, a gain of +955 points, marking its largest daily rise in more than a year.
• Nifty 50 advanced 1.82 % to 19,560 points, climbing +356 points and breaking its 18‑month low.
• The Bank index surged 3.7 %, lifting the top three lenders to record highs.
• The Nifty Bank and Sensex Bank components each rose 3–4 %, with HDFC Bank leading the pack at +4.1 % and ICICI Bank following at +3.8 %.

The rally pushed the broader market past the 19,500‑point barrier on the NSE and the 62,000‑point mark on the BSE, levels last seen in late 2023. The positive sentiment also translated into a modest lift in corporate and consumer discretionary stocks, as investors moved away from the defensive tilt that had dominated markets since early May.

What’s Driving the Bank Rally?

The article cites several factors that are energising the banking sector:

1. Higher Net Interest Margins (NIMs) – With the Reserve Bank of India (RBI) keeping its repo rate steady at 6.50 % after a series of hikes in 2023, banks are benefiting from a sustained spread between the interest they earn on loans and the rates they pay on deposits. The higher spread is expected to translate into stronger earnings, especially for large lenders with diversified product portfolios.

2. Improved Credit Growth – The RBI’s latest Monetary Policy Review (MPR) highlighted steady credit growth, with the banking system adding ₹2.5 trillion in new credit in the past quarter. Analysts say that this momentum, combined with a robust real‑estate and SME lending backdrop, gives banks confidence in their loan‑to‑deposit ratios.

3. Positive Earnings Outlook – Ahead of the quarterly earnings announcements, market watchers expect banks to report higher net income in the coming quarter. A linked article in NewsBytes quoted the CFO of HDFC Bank, who said the bank expects a 12 % rise in net profit for the quarter ending in December 2024.

4. Sector‑wide Buying Pressure – The article references a recent “institutional buying spree” in the banking sector, triggered by a wave of buy‑backs announced by several banks in late September. The buy‑backs have reduced the share supply and supported prices.

Macro Context: RBI Policy and Global Sentiment

The backdrop of the rally is the RBI’s decision to hold the policy repo rate at 6.50 % for the third consecutive meeting. While the RBI maintained its stance of “steady and measured” tightening, it also signalled that it would remain vigilant to inflation and credit risk. The decision was well‑received by investors, who had been waiting for a clearer view of the RBI’s next move.

In the global arena, the U.S. Federal Reserve’s policy statements—particularly the recent pause on rate hikes—helped calm international markets. The article notes that the London and Hong Kong exchanges were also up in the early trading hours, providing a green backdrop for Indian equities.

Market Sentiment and the Way Forward

While the rally has lifted the market to new highs, the article warns that the banks’ gains are not without risk. The potential for higher interest rates in the coming months, coupled with looming inflationary pressures, could compress margins. The RBI’s “policy neutrality” stance suggests that it may revisit rates if inflation shows signs of rising beyond the 4‑6 % target range.

A linked piece on NewsBytes emphasised the importance of monitoring the upcoming earnings reports. “Investors should keep a close eye on the banks’ earnings releases in the next few weeks,” the article advised. “A weak earnings performance could reverse the current positive sentiment and drag the indices down.”

Bottom Line

The Sensex and Nifty’s surge this week is a testament to the resilience of India’s banking sector and the confidence that investors have in the country’s policy environment. While the rally is buoyed by strong fundamentals—higher NIMs, robust credit growth, and a favourable macro backdrop—the market participants will need to stay alert for any shifts in RBI policy or global economic conditions that could alter the trajectory.

For now, the Indian equity market appears poised to continue its upward trend, with a focus on the upcoming earnings season and the ongoing developments in monetary policy. The banks will likely remain the key drivers of market sentiment, as investors seek the steady returns they promise in an uncertain but hopeful environment.