Indian stock markets took a breather during Sunday's special Diwali Muhurat trading session, ending marginally lower after a powerful seven-session rally that had lifted benchmark indices by more than 10%.
Despite the subdued finish, broader market sentiment remained positive, supported by renewed foreign investor interest, softer crude oil prices and encouraging corporate earnings.
The one-hour symbolic trading session on November 8 saw the Nifty 50 decline 0.18% to close at 24,986.40, slipping below the psychologically important 25,000 mark. The Sensex edged down 0.04% to settle at 80,999.40.
The modest decline came after seven consecutive sessions of strong gains, suggesting that investors were taking a cautious approach following the sharp rise in stock prices.
Sensex: Fell 0.04% to 80,999.40.
Nifty 50: Declined 0.18% to 24,986.40.
Foreign inflows: FPIs invested ₹45,961 crore over five sessions last week.
Small-cap stocks: Nifty Smallcap 100 gained 1%.
Pharmaceuticals: Nifty Pharma rose 1.7%, supported by Divi's Laboratories.
Metals: Tata Steel advanced 2.1% following improved operating performance.
Market outlook: Analysts remain constructive on earnings growth and valuations, although near-term volatility remains a possibility.
Although the benchmark indices closed marginally lower, several sectors and individual stocks posted gains during the special session. Seven of the 16 major sectoral indices finished in positive territory.
The Nifty Smallcap 100 index gained 1%, outperforming the benchmarks, while the Nifty Midcap 100 index edged up 0.1%.
Pharmaceutical stocks emerged as the strongest performers, with the Nifty Pharma index advancing 1.7%.
Divi's Laboratories led the sectoral gains, surging 7.5% after reporting a 64% year-on-year increase in quarterly profit. The strong earnings performance attracted investor interest and provided support to the broader pharmaceutical sector.
Metal stocks also recorded modest gains. The Nifty Metal index rose 0.4%, supported by a 2.1% increase in Tata Steel shares.
Tata Steel's performance followed an 18% rise in operating profit, alongside positive brokerage assessments of its India business.
The performance of pharmaceuticals and metals indicated that investors continued to favour companies with improving earnings prospects, even as the broader market paused.
One of the biggest factors behind the recent market rally has been the resurgence of foreign portfolio investor (FPI) inflows.
Foreign investors purchased Indian equities worth ₹45,961 crore during five trading sessions last week. Thursday witnessed their largest single-day buying activity in India in nearly six years.
The renewed inflows have helped strengthen market confidence after a period of uncertainty surrounding global economic conditions, currency movements and geopolitical developments.
The sharp decline in international crude oil prices following the US midterm election results has also provided significant relief to Indian equities.
The combination of declining crude prices, strong foreign institutional investor buying, favourable global developments and better-than-expected September-quarter corporate earnings has strengthened the foundation of the market rally.
Another factor supporting domestic equities has been their relatively limited exposure to the artificial intelligence sector compared with some major global markets.
While technology stocks elsewhere have faced selling pressure amid concerns surrounding AI-related valuations and spending, Indian benchmarks have remained relatively insulated.
The domestic market's broader representation of banking, financial services, pharmaceuticals, automobiles, metals and consumption-linked businesses has helped cushion the impact of weakness in global technology shares.
The sharp recovery in Indian equities has raised expectations of further gains over the coming year. However, the sustainability of the recovery will depend on several factors, including continued foreign investor participation, movements in crude oil prices, global market stability and the ability of companies to maintain earnings growth.
For investors, the Diwali session offered a reminder that even a strong bull run can experience periods of consolidation.
The next phase of the market's movement will likely be determined by whether foreign inflows remain robust and whether corporate earnings can justify the recent sharp increase in share prices.
With the benchmarks having recovered substantially in just seven sessions, the focus now shifts from the speed of the rally to its sustainability.