A major driving force behind the continuous record highs in the Indian stock market is the derivatives market, which has reached a record size of $116 billion.

Foreign institutional investors such as global equity funds have raised their bets on derivatives in the Indian stock market to unprecedented levels, which is also a key driving force behind the continuous record highs in the Indian stock market. With the continuous influx of foreign capital, the Indian stock market has rebounded significantly by over 18% from its temporary low point in June, and market observers say foreign investors are expected to remain optimistic. According to the latest statistics from institutions, as of last Friday, foreign institutional investors, including equity funds, held a record high of 9.7 trillion rupees (approximately $116 billion) in anchored options and futures on multiple stock benchmark indices and individual stocks listed on the National Stock Exchange of India. On that day, they increased their bullish bets on Indian index futures to over 500,000 contracts, including futures linked to the Indian stock market benchmark - NSE Nifty 50 index. Overall, foreign exposure to bullish derivatives in the Indian stock market hit the highest statistical level since 2015. Since the ruling party of Indian Prime Minister Narendra Modi lost a majority of seats in the Indian Parliament in June, the Indian stock market has seen a remarkable recovery process. The Indian Nifty index has risen by over 18% from its temporary low point in that month, becoming one of the best-performing benchmark indices in Asia. Following the announcement of a significant 50 basis point rate cut by the Federal Reserve last week to kick off an easing cycle, global markets have seen a resurgence in risk appetite, and on Monday, the Indian stock index hit a new high. "These latest signs indicate that foreign investors are actively bullish on the Indian market, and this trend is expected to continue for some time," said Anuj Dixit, Executive Vice President of the stock department at Mumbai's Sovereign Global. Statistics also show that since July 1, global equity funds have invested a net of $8.5 billion into the Indian local market, marking the largest quarterly inflow in over a year. This is despite Indian stocks being relatively high in valuation compared to their emerging market peers. In terms of new IPOs, the Indian stock market is also extremely hot. India has become a hotspot for major financial transactions, with companies making their first public offerings (IPOs) on the Indian stock market raising nearly $9 billion this year. Data shows that large transactions involving mergers and acquisitions, IPOs, etc., involving Indian companies have increased by 28% to $77 billion, and some multinational companies like Hyundai and LG Electronics are considering listing their Indian subsidiaries in India to capitalize on the country's economic growth trend. The merger and acquisition market in India is also extremely hot, with data from JPMorgan showing that from 2021 to 2024, the average size of mergers and acquisitions in the Indian market is expected to increase by $140 billion annually, double the amount from 2011 to 2020.