Indian stock markets show potential for a traditional Santa Claus rally, with Nifty averaging 1.5% December gains over the past decade. RBI rate cuts, strong domestic flows, and improving earnings fuel optimism for Sensex-Nifty rebound toward record highs by early 2026.
The Santa Claus rally—typically a market uptick in late December and early January—holds promise for Indian equities after a volatile 2025. Recent RBI rate cuts and robust DII inflows have lifted Nifty above 26,000 and Sensex past 85,000, snapping losing streaks with broad sectoral gains in metals, energy, and IT.
Analysts cite historical patterns where Indian indices deliver positive returns over 80% of Decembers, driven by year-end liquidity, festive spending, and global risk-on sentiment. Morgan Stanley sees 50% odds of Sensex hitting 95,000 by Dec 2026, backed by policy pivots and 20%+ earnings growth.
While FII flows remain modest amid US tariff concerns, stabilizing crude prices below $65 and potential Fed cuts enhance prospects. Experts advise buy-on-dips unless Nifty breaches 25,800 support.
Key Highlights
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Nifty's 10-year Dec average: +1.5%; broader indices often outperform.
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Recent rally: Nifty +320 pts to 26,205; Sensex +1,022 pts to 85,609.
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Drivers: RBI cuts, DII buying, falling oil, global optimism.
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2026 Outlook: Sensex 95,000 (50% probability per Morgan Stanley).
Sources: Economic Times, Times of India, Business Standard.