Sensex up 3,000 pts this week, Nifty tops 23,300: Why are markets rising?

The rally in the market comes at a time when trade tensions are escalating and more is expected when the reciprocal tariffs kick in on April 2.

Indian benchmark indices rebounded this week with analysts suggesting that the "worst is over," driven by foreign institutional investors returning to Indian stocks amid attractive valuations and signs of economic recovery.

 

During the week, Nifty 50 has risen by 4.26 per cent or 953.2 points to 23,350.4 while the 30-stock Sensex has risen by 4.17 per cent or 3,076 points to the 76,905 level. This will be the biggest weekly rally for the key gauges since February 2021, according to Bloomberg data. Meanwhile, the index for the midcap and small caps were up 7.27 per cent and 8.14 per cent respectively, for the week ending March 21.  

 

On Friday, the domestic stocks extended their gains for the fifth day with the Nifty and Sensex up by 0.69 per cent and 0.73 per cent. The broader markets continued to outperform the benchmark indices. During the day, the market breadth was in favour of buyers, with 2,823 stocks posting advances, 1,213 showing declines and 126 remaining unchanged, according to BSE data. 

 

The rally in the market this week comes at a time when trade tensions are escalating and more is expected when the reciprocal tariffs kick in on April 2.  

Nifty has immediate support at 23,000 then 22,800 zones while resistance at 23,333 then 23,500 zones, according to analysts at Motilal Oswal. "Now it has to hold above 23,000 zones for an up move towards 23,333 then 23,500 zones while supports can be seen at 23,000 then 22,800 zones," Motolal Oswal said in a note.  

 

Key reasons why Indian stock markets rallied today:

 

FIIs make a comeback: Global funds who were on record exodus this year have turned net buyers in the cash market on Tuesday and Thursday this week. On Tuesday, FIIs bought stocks worth ₹1,462 crore and on Thursday they mopped up stocks worth ₹3,239 crore. These global funds have sold ₹1.4 trillion in 2025 so far. However, domestic investors remained resilient to buy on every dip during the year.  

"The main driver of the rally is the buying by FIIs in the cash market in two days and perhaps, more importantly, a sharp decline in their short positions and increase in long positions in the futures market," according to V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services. 

 

Valuation drop: During the market rout, stocks saw a fall in valuations from their peak levels. The Nifty 50, trades at a price-to-earnings (P/E ratio) of 19 times, down from its peak of 23.8 times in September last year. The Nifty Auto and Nifty FMCG indices' PE, too, have fallen to 20 times and 37 times, respectively, from their peak of 29 times and 47 times. Meanwhile, the Nifty Bank trades at 2 times price to book (P/B ratio), down from their peak of 2.2 times.

 

The overall valuation for stocks came down significantly and the market saw rebalancing with investors pocketing quality stocks, according to G Chokkalingam of Equinomics Research.  

 

Economic growth revival: India's retail inflation moderated to a seven-month low of 3.61 per cent in February, triggering hopes of another repo rate cut. Meanwhile, the Index for Industrial Production (IIP) numbers for January showed factory output growth surged to an eight-month high of 5.01 per cent from 3.54 per cent in December.

 

The uptick in the economy also prompted a risk-on mood among investors, according to Chokkalingam. Companies are also expected to post significantly better growth numbers in the second half of the fiscal, he added. 

 

Global rally post Fed meet: The Indian market also got a boost from its global peers during the week with the stocks rallying after US Federal Reserve Chair Jerome Powell hinted at more rate cuts during the year. Further, analysts see lesser impact for India from the trade war with the US. "It is very difficult to expect a very severe impact for India in the trade war, as our service exports are not very sensitive to the tariff issue," Chokkalingam said. 

 

A significant feature of the rally is that the majority of the gainers are the domestic consumption themes which will be insulated from the reciprocal tariffs, according to Vijayakumar.