The Indian stock market has seen a significant surge this Diwali month, with the Sensex jumping over 4,000 points. This impressive rally has sparked debate among market participants about whether a new bull run is underway or if this is just a temporary festive surge.
Key Highlights of the Surge
The Sensex has soared by 4,159 points, a 5% increase, in October alone. This surge has been fueled by a turnaround in foreign institutional investors (FIIs), who have invested over ₹7,300 crore back into Indian equities. The Sensex is now approaching its all-time high, sitting approximately 1,552 points away from its peak of 85,978. The Nifty is also trailing its record by a mere 410 points.
Market Sentiment and Expert Opinions
The recent gains have prompted market veterans to question whether this Diwali rally signifies the beginning of a new bull cycle or is simply a short-lived festive phenomenon. Dr. Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital, believes that the pessimism and negative sentiments for India have peaked. He anticipates that Samvat 2082 will exceed expectations as global conflicts subside, interest rates decrease, and trade wars move towards resolution.
However, Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, points to a critical factor: a sharp decline in India's earnings growth to 5% in FY25 from the average of 24% in the preceding three years. Vijayakumar also noted the potential for automobile and white goods sales to increase during the festive season, which could boost earnings growth to 8-10% in FY26 and potentially 15% in FY27. He tempers enthusiasm by stating that the major trend will depend on how earnings growth pans out, as the market is ultimately driven by earnings.
Sectoral Performance
The rally has primarily concentrated on frontline stocks and institutional favorites. The Nifty Bank has surged over 6% this month, while midcap and smallcap indices have seen more modest gains of 3-4%, indicating that the broader market is still lagging.
Muhurat Trading
During the Diwali Muhurat trading session on October 21, the Sensex and Nifty 50 started on a positive note. The Sensex opened at 84,484.67, a 0.14% increase, while the Nifty 50 opened at 25,901.20, a 0.22% increase. However, both indices closed with minor gains. The Sensex ended 62.97 points higher at 84,426.34, and the Nifty 50 settled 25.45 points higher at 25,868.60.
Market Outlook
Market analysts are expressing optimism for the upcoming financial year, anticipating a profit-led revival following a period of consolidation. Despite potential global challenges, market sentiment seems to be improving as India enters Samvat 2082 with better valuation comfort and fiscal stability.
Important Considerations
While the Sensex and Nifty hovered largely flat between Diwali 2024 and Diwali 2025, a few small and midcap stocks delivered significant gains. Investors should be aware that valuations in many counters are high, liquidity is thin, and price discovery is often driven by sentiment. Some stocks are trading at extreme earnings multiples, making them speculative bets.
Trading activities will resume on October 23, and investors will likely focus on the upcoming second-quarter corporate earnings, particularly from the finance, energy, and information technology sectors.
