Indian equity markets ended Friday’s trading session on a firm note, reversing early weakness and closing significantly higher as investor sentiment improved following the Reserve Bank of India’s decision to reduce the benchmark repo rate by 0.25% to 5.25%. The move, the third rate cut of the financial year, strengthened expectations of cheaper bank loans and enhanced liquidity, giving markets the momentum they lacked at the start of the trading day.

Sensex and Nifty Surge as Banking, Auto and IT Stocks Lead the Upside Despite Sectoral Pressure

The Sensex climbed 447 points or 0.52% to settle at 85,712, while the Nifty 50 ended 152 points or 0.59% higher at 26,186 on December 5, 2025. Although the market began cautiously due to subdued global cues and sustained foreign selling, the RBI’s policy action helped shift the mood decisively toward optimism. Out of the 30 Sensex constituents, 20 closed in the green, while 34 of the 50 Nifty-listed companies gained ground.

Buying was most prominent in auto, banking, IT and realty counters—sectors typically sensitive to interest-rate movements and liquidity conditions. Key outperformers among prominent Sensex names included SBI, Bajaj Finserv, Bajaj Finance, Maruti and HCL Tech, all of which benefited from expectations of cheaper borrowing costs and improved credit demand. On the other hand, FMCG, pharma, metal and media stocks faced selling pressure, with Hindustan Unilever, Eternal, Sun Pharma and Trent among notable laggards of the session.

The day also witnessed a mixed performance in Asian markets. The Korea KOSPI closed 0.62% higher, while Japan’s Nikkei fell 1.10%. Hong Kong’s Hang Seng Index also retreated by 0.50%, reflecting broader concerns across the region about economic slowdown and geopolitical tensions. In the United States, the Dow Jones closed marginally lower on December 4, though the Nasdaq Composite and S&P 500 managed modest gains.

One of the day’s major highlights was the continued strong investor interest in ongoing IPOs. Meesho’s public issue, which has generated significant enthusiasm in recent days, reached a subscription level of 8.28 times within two days, with retail participation increasing sharply. The IPO has been closely watched due to Meesho’s rapid growth in India’s online retail and social commerce space. Two other IPOs—EKS Limited and Vidya Wires—also remained open for subscription, recording robust demand that underlined ongoing investor appetite for new listings even amid volatile market conditions. Estimated listing prices for these IPOs suggested potential upside, contributing further to market optimism.

Foreign Institutional Investors, however, continued their selling streak. FIIs offloaded shares worth ₹1,944.19 crore on December 4 alone, bringing their total selling in the first four days of December to nearly ₹10,000 crore. This is consistent with the broader trend observed in November, when FIIs sold more than ₹17,500 crore. Domestic Institutional Investors, in contrast, have remained strong buyers, absorbing market weakness and supporting overall sentiment. In the first four days of December, DIIs purchased over ₹15,596 crore worth of equities, reflecting growing domestic confidence in India’s economic outlook.

Broader Market Trends, FII–DII Flows, and Economic Signals Shape Outlook as Analysts Predict Higher Targets for 2026

Market analysts viewed Friday’s recovery as a healthy sign amid global uncertainties and persistent foreign outflows. The RBI’s rate cut has reinforced expectations of improved credit offtake in the coming quarters, particularly in interest-sensitive sectors such as automobiles, housing and financial services. The decline in borrowing costs, combined with supportive domestic liquidity conditions, could pave the way for sustained market momentum heading into the new year.

Foreign investors’ continued selling has been attributed to global risk aversion, rising bond yields in developed markets and shifting capital flows toward safer assets. Despite this, the resilience of domestic institutional buyers has helped prevent deeper corrections. Analysts note that the increasing participation of retail and domestic institutional investors—backed by higher savings inflows into mutual funds—has made Indian markets more insulated from external shocks compared to previous years.

The medium-term outlook remains optimistic, with Bank of America setting a target of 29,000 for the Nifty by 2026. This projection represents an 11% rise from current levels and assumes steady earnings growth, supportive economic policies and continued structural reforms. The brokerage has cautioned, however, that valuation upside may be limited, and the next phase of market expansion will depend on income growth and sectoral leadership.

Broader market conditions on Thursday, December 4, mirrored Friday’s trend, with the Sensex closing 159 points higher and the Nifty gaining 48 points. Sectors such as auto, IT and realty again led the gains, underscoring their strength amid shifting economic conditions. Meanwhile, the media index experienced a sharp decline of 1.45%, reflecting ongoing challenges in advertising demand and business growth.

The market’s overall movement indicates a strong undercurrent of domestic investor confidence. Even with foreign selling pressures and global volatility, India’s economic fundamentals—bolstered by rate cuts, rising consumption patterns and expanding corporate earnings—continue to reinforce positive sentiment. Increasing IPO activity further demonstrates the appetite for new opportunities and the belief in India’s long-term growth story.

As the final trading sessions of the year approach, analysts expect short-term volatility but remain broadly optimistic about market direction. The combination of policy support, robust domestic liquidity and strong sectoral performance suggests that Indian equities are positioned to enter the next financial year on a stable footing, with continued potential for growth across both large-cap and emerging sectors.

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