India's BSE Sensex jumped 1,097.33 points to 82,186.92 in early trade on Wednesday, as markets reopened after a Diwali holiday to a fresh wave of foreign buying that has brought overseas investors' net purchases of Indian shares to INR 53,170 crore (about US$5.7 billion) so far in November. The NSE Nifty 50 rose 274.30 points to 25,317.55, according to the Press Trust of India.

The turnaround matters for investors across Asia because India spent much of October as a source of funds for other markets. Foreign investors sold Indian stocks heavily in October, and the money is now flowing back as oil prices fall and the AI trade that drove global technology stocks loses momentum. Analysts say cheaper oil also eases pressure on India's inflation and external accounts.

Foreign investors drive the Sensex and Nifty rally

Exchange data cited by PTI showed foreign institutional investors bought INR 7,212.22 crore of Indian equities on Monday, after purchases of INR 13,749.82 crore on Friday. Domestic markets were shut on Tuesday for Diwali Balipratipada, so Wednesday's session was the first chance to trade on those flows and on overnight moves abroad.

V.K. Vijayakumar, chief investment strategist at Geojit Investments, said the Nifty 50 has gained 8.6% in just seven trading days this month. He attributed the surge mainly to the foreign buying and described the weakening of the AI trade as a "positive global clue" for India. He said the deeper support came from second-quarter results that beat expectations, and that foreign funds were likely to keep buying, with banks and financials, telecom, capital goods and selected auto and pharmaceutical stocks the likely beneficiaries.

Early gainers on the Sensex included InterGlobe Aviation, the parent of IndiGo, along with Mahindra & Mahindra, Eternal, HDFC Bank, Power Grid and Bharti Airtel. Titan was the only decliner among the 30 Sensex stocks in the opening trade, PTI reported.

The rally builds on a sharp run. In the week to Nov. 6, the Sensex soared 6,568.49 points, or 8.82%, and the Nifty jumped 1,977.25 points, or 8.57%. The streak paused briefly during the special Muhurat trading session on Sunday that opened Samvat 2083, the new Hindu calendar year, when the Sensex slipped 28.62 points to 80,999.40 on profit-taking. On Monday the Sensex rose 107.25 points, or 0.13%, to 81,106.65, and the Nifty added 58.25 points, or 0.23%, to 25,044.65, led by State Bank of India, Trent, Larsen & Toubro and other bank and blue-chip stocks.

Vinod Nair, head of research at Geojit, said on Monday that better foreign participation and stronger-than-expected corporate earnings had raised expectations of an upgrade to earnings forecasts for the fiscal year ending March 2027. He added that large-cap valuations, easing geopolitical worries and lower crude prices provided a constructive medium-term backdrop, while noting that several tailwinds already appear priced in.

Oil retreat and a firmer rupee

Brent crude, the global benchmark, traded at about $92.44 a barrel on Wednesday morning. It had climbed to around $117.64 before slipping below $100, according to Amit Pabari, managing director of CR Forex Advisors. Hopes of de-escalation in the Middle East have taken some of the risk premium out of oil after U.S. President Donald Trump indicated that fresh military strikes against Iran were unlikely if negotiations made progress.

Ponmudi R, chief executive of trading firm Enrich Money, said the fall in oil prices eases concerns about imported inflation and pressure on India's external balances. Vijayakumar called Brent's drop to $92 "an additional macro relief for India."

The currency has followed. The rupee rose 24 paise to 93.74 per dollar in early trade on Monday, after jumping 43 paise to close at 93.98 on Friday, PTI reported. Pabari said that with the dollar below 94 rupees, the chance of further gains toward 93.50 and 93 had increased, with resistance around 94.40 to 94.50.

What to watch for Indian stocks

The cushion is not unlimited. The Reserve Bank of India said its foreign exchange reserves fell by $2.691 billion to $717.056 billion in the week ended Oct. 30, a reminder of the cost of defending the rupee during October's slide. Analysts have also flagged the risk of intermittent profit-taking after a rally of close to 9% in a little over a week.

In other Asian markets on Wednesday morning, South Korea's Kospi and Japan's Nikkei 225 traded higher, while Shanghai's SSE Composite and Hong Kong's Hang Seng index were lower, according to PTI.

The next tests for the Sensex and Nifty are the daily exchange figures on foreign flows, which will show whether November's buying holds up, and the RBI's next weekly reserves figures, which will indicate how much support the rupee still needs.