Indian stock market witnessed a broad-based buying, which lifted Indian stock market benchmarks—the Sensex and the Nifty 50—by more than 1 per cent each in intraday trade on Thursday, June 5.
However, the key indices trimmed their gains to end around half a per cent higher, marking the second straight session of gains.
The Sensex opened at 81,196.08 against its previous close of 80,998.25 and jumped over 900 points, or 1 per cent, to an intraday high of 81,911.13. The Nifty 50 opened at 24,691.20 against its previous close of 24,620.20 and jumped over a per cent to an intraday high of 24,899.85.
Finally, the 30-share pack Sensex ended 444 points, or 0.55 per cent, higher at 81,442.04, and the Nifty 50 closed the day with a gain of 131 points, or 0.53 per cent, at 24,750.90.
The BSE Midcap and Smallcap indices also rose by 0.39 per cent and 0.65 per cent, respectively.
The overall market capitalisation of firms listed on the BSE rose to nearly ₹448 lakh crore from ₹445 lakh crore in the previous session, making investors richer by about ₹3 lakh crore in a single session.
What drove the Indian stock market higher?
Experts highlight the following five reasons that may have triggered healthy buying in the Indian stock market:
1. RBI rate cut hopes
The market expects a 25 bps rate cut from the Reserve Bank of India along with a favourable projection of growth and inflation estimates. The Monetary Policy Committee (MPC) of the RBI began its three-day huddle on June 4, and its outcome is due on June 6.
However, some experts believe the central bank may go for a bigger rate cut of 50 bps on June 6.
“We expect a 50-basis point rate cut in June’25 policy as a large rate cut could reinvigorate a credit cycle,” said an SBI Research report released on Monday, 2 June 2025. “Cumulative rate cut over the cycle could be 100 basis points,” EBI Research’s experts said.
While a 25 bps rate cut is fairly discounted in the market, a bigger cut would be a strong short-term catalyst that can significantly boost domestic market sentiment.
2. Weakness in the US dollar, bond yields
Weakness in the US dollar and bond yields amid signs of a slowdown in the US economy influenced sentiment in emerging markets, including India.
A weaker dollar and declining bond yields make emerging markets like India attractive for foreign investors. After selling Indian equities in the cash segment for the last few days, foreign institutional investors (FIIs) bought Indian stocks worth ₹1,076.18 crore in the previous session.
“The major economic news is the sharp dip in the US ISM PMI data. This indicates that the US economy is slowing down sharply. The US 10-year bond yield has declined to 4.36 per cent and, given the slowing US economy, is likely to trend lower. This will turn out to be good for emerging markets like India in the medium term, but the spike in uncertainty will keep the market within the present range for the near-term,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
3. India-US trade deal could be near
According to media reports, US Secretary of Commerce Howard Lutnick signalled that a trade deal between the US and India could be near.
Speaking at the US-India Strategic Partnership Forum Annual Leadership Summit on Monday, Lutnick said that while trade deals usually took two-three years, the US is trying to close them within a month.
4. Rupee’s rise against the dollar
Rupee’s rise against the US dollar also influenced domestic market sentiment. According to Bloomberg data, the domestic currency strengthened by about 23 paise to 85.68 per dollar in intraday trade on June 5.
5. Favourable growth-inflation dynamics
Experts say the underlying market sentiment remains positive due to a bright growth outlook of the Indian economy amid expectations of an above-normal monsoon and easing inflation.
“We see a confluence of nine structural drivers likely to position India for sustained strong economic and corporate earnings growth,” said Amish Shah, Head of India Research, BofA Securities.
Shah pointed out that “India ranks as the second country globally, after the US, to deliver the best market returns globally over the past three decades (7 per cent CAGR in USD terms), with growth driving a large share of its stock returns rather than valuation expansion.”
India ranks as the top country globally to provide a high number of stock compounders, a trend we expect to continue. However, we are cautious on markets near term as valuations seem full and markets are ignoring risks of likely slowing global growth,” Shah added.
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