Record high coming? Sensex surges over 700 points, Nifty crosses 26,000: 5 factors driving market rally

Market Overview - The S&P BSE Sensex increased over 700 points to an intraday high of 84,932.08, while the NSE Nifty 50 rose over 200 points to a day's high of 26,005.95, with the Nifty index just 1% away from its all-time high of 26,277.35 and the Sensex sitting 1.2% below its record peak of 85,978.25 [1][17] Factors Driving the Rally - Softer-than-expected U.S. inflation data has reinforced expectations for additional Federal Reserve rate cuts in 2025, with hopes for rate reductions at upcoming policy meetings in November and December [2][17] - Progress in U.S.-China trade negotiations has improved market sentiment, with reports indicating a finalized framework for a potential trade agreement to be reviewed by leaders [6][17] - The Indian rupee has gained nearly 1% in October, supported by the Reserve Bank of India's interventions, stabilizing the currency and allowing it to outperform regional peers [3][8][9] - Strong foreign portfolio inflows have bolstered the rupee, with overseas investors purchasing approximately $2.7 billion worth of Indian equities and bonds this month [10][17] - Domestic fundamentals in India are showing renewed strength, driven by festival season demand and a recovery in private sector capital expenditure, which is expected to positively impact growth and the stock market [11][17] Banking Sector Performance - Banking stocks have extended gains due to solid quarterly earnings, with the Nifty Bank and Nifty PSU indices rising up to 1%, driven by strong performances from major banks like HDFC Bank, ICICI Bank, and State Bank of India [13][17] - HDFC Bank reported an 11% year-on-year profit increase, supported by higher net interest income, while smaller lenders also posted robust results, enhancing investor sentiment [14][17] Technical Analysis - Market indicators suggest potential for further gains in the near term, with a morning star pattern indicating an early return to the upside, targeting 26,186 [16][18] - If the initial upswing fails to surpass the 25,940–26,000 barrier, downside moves may resume, with targets near 25,590–25,400 [18]