Economic Survey 2026 Lifts Market: Sensex Rebounds 900 Points

Market Rebounds on Economic Survey Optimism

Indian equity benchmarks staged a remarkable recovery on Thursday, reversing early losses to close higher for the third consecutive session. The turnaround was fueled by the optimistic projections presented in the Economic Survey 2026, which bolstered investor confidence just days before the Union Budget. The BSE Sensex surged more than 900 points from its intraday low, while the Nifty 50 reclaimed the 25,400 mark, signaling a significant shift in market sentiment.

Despite the strong finish, gains were tempered by a weakening rupee, which touched a new record low during the session, and persistent selling by foreign portfolio investors. The market's performance highlighted a tug-of-war between strong domestic fundamentals and challenging global headwinds.

Key Projections from the Economic Survey

The primary catalyst for the market's rebound was the Economic Survey's positive outlook on the Indian economy. The pre-Budget document projected a real GDP growth rate between 6.8% and 7.2% for the financial year 2027 (FY27), underpinned by robust domestic demand. While this indicates a slight moderation from the current year's estimated growth of 7.4%, the survey described the outlook as one of "steady growth amid global uncertainty, requiring caution, but not pessimism."

Furthermore, the survey reassured investors that the government is on a credible path of fiscal consolidation. It noted that the Centre is well on track to achieve its fiscal deficit target of 4.4% of GDP by FY26. This commitment to fiscal prudence, combined with a strategy prioritizing capital expenditure, was seen as a major positive, enhancing policy credibility and providing flexibility to navigate evolving economic conditions.

A Volatile Day on the Street

The trading session was marked by significant volatility. The benchmark indices opened lower and fell by as much as 0.8% in early trade. However, as details from the Economic Survey emerged, buying momentum returned. The BSE Sensex, which had fallen to an intraday low of 81,707.94, staged a powerful comeback of 920.58 points to hit a high of 82,628.52. The 30-share index ultimately closed at 82,566.37, up 221.69 points or 0.27%.

Similarly, the Nifty 50 recovered strongly to top the 25,400 level, closing at 25,418.90, a gain of 76.15 points or 0.30%. The broader markets also participated in the recovery, with both the mid-cap and small-cap indices ending the day with modest gains of 0.2%.

Sectoral Performance and Market Movers

The recovery was largely driven by the financial sector. The financial services index, which was trading in the red earlier in the day, closed 0.6% higher. Private bank stocks were particularly strong, gaining 1% and providing crucial support to the benchmark indices. This rotation into heavyweight banking stocks was instrumental in turning the market positive.

However, the information technology (IT) sector acted as a drag on the market. The Nifty IT index fell by 0.8%, weighed down by the US Federal Reserve's decision to keep interest rates unchanged. A higher interest rate environment in the US typically reduces the attractiveness of emerging markets for foreign capital.

Expert Analysis and Outlook

Market experts noted that the Economic Survey provided a much-needed boost to sentiment. Anil Rego, Founder and Fund Manager at Right Horizons PMS, highlighted the survey's emphasis on a reform-led framework, including potential relief in income tax and GST, which should aid long-term growth. Rumki Majumdar, Economist at Deloitte India, pointed to the confidence in resilient growth driven by domestic demand and public capital expenditure.

However, analysts remain cautious. Ajit Mishra, SVP of Research at Religare Broking Ltd, stated that investors are awaiting key domestic events, particularly the Union Budget. He pointed out that "global uncertainty, mixed corporate earnings and continued foreign institutional selling weighed on risk appetite." From a technical standpoint, Mishra noted that the Nifty is hovering around its long-term 200-day moving average and, having crossed the 25,350 hurdle, could inch towards the 25,600 zone.

Lingering Headwinds

Despite the positive domestic cues, several challenges persist. Foreign portfolio investors (FPIs) have remained net sellers, offloading Indian equities worth $1.56 billion in January so far, following record outflows in 2025. This sustained selling pressure, coupled with the rupee's depreciation to a record low, is keeping the overall market mood cautious.

Conclusion

The stock market's sharp intraday recovery on Thursday was a direct response to the encouraging outlook presented in the Economic Survey 2026. Projections of steady GDP growth and a commitment to fiscal discipline provided a strong domestic narrative. However, investors remain wary of external pressures like FPI outflows and currency weakness. All eyes are now on the Union Budget, which will be presented on February 1 and is expected to set the market's direction in the near term.