Indian stock markets, including the Sensex and Nifty, surged to new all-time highs on Friday, supported by significant gains in the auto, energy, and banking sectors. As markets open today, a positive sentiment is expected, tracking upbeat trends from Asian markets. Additionally, foreign fund inflows are likely to bolster investor confidence. According to NSE data, Foreign Institutional Investors (FIIs) purchased Indian equities worth Rs 14,064.05 crore. So far this month, foreign investors have poured in around Rs 33,700 crore, driven by a U.S. interest rate cut and the resilient Indian market. This marks the second-highest monthly inflow of the year, following Rs 35,100 crore in March.

Encouragingly, a Reserve Bank of India (RBI) report highlighted a rise in net foreign direct investment (FDI) to $5.5 billion in the April-July period, compared to $3.8 billion in the same period last year. This growth was attributed to a 23.6% year-on-year increase in gross inward FDI, amounting to $27.7 billion for FY25’s first four months. Further support came from data showing that India’s forex reserves climbed by $223 million to a new record high of $689.458 billion.

Traders are also optimistic after a report suggesting that India is poised to achieve 7% growth this fiscal year, despite global economic challenges. Additionally, retail inflation for farm and rural laborers eased in August, providing some relief.

However, concerns remain regarding food price volatility, as highlighted by the RBI’s latest bulletin. While overall inflation has remained below the 4% target for the second consecutive month, global economic activity is slowing, prompting caution among policymakers.

Auto stocks are expected to be in focus, following ICRA’s report that the competition between strong hybrid vehicles and electric vehicles (EVs) will remain fierce, with both likely to hold an 8% market share by 2027-28. There will also be reactions in the metal sector as India plans to impose retaliatory duties on certain EU goods under WTO rules, following disagreements over European safeguard measures on steel products.

In the U.S., markets closed mostly lower on Friday after digesting the Federal Reserve’s recent 50-basis-point rate cut. Meanwhile, Asian markets are trading higher ahead of further expected rate cuts and key U.S. inflation data.

Domestically, the Indian markets saw an excellent rally on Friday, with the Sensex crossing the 84,000 mark for the first time and the Nifty closing at a new record high. The rally was driven by strength in Realty, Capital Goods, and Auto sectors, coupled with positive trends from U.S. and Asian markets.