India-Pak truce talks lift Nifty, Sensex 2%: reasons for market rally today

India's benchmark indices staged a relief rally on Monday, buoyed by a truce with its nuclear-armed rival Pakistan after tensions nearly rose into a full-blown war. The risk on sentiment also saw a boost on de-escalation in the US-China trade conflict. 

The benchmark indices recorded their strongest intraday rally since November 22 of last year, with the BSE Sensex soaring 1,981 points to reach an intraday high of 81,435, while the Nifty50 jumped 600 points to touch a high of 24,608.

  In the broader markets, the Nifty MidCap index rose over 2 per cent while the small-cap benchmark was up over 3 per cent. All but one sectors on BSE advanced, with Realty and Power being among the top gainers.  The market breadth was skewed in favour of the buyers. About 2,846 stocks rose, 262 declined, while 104 remained unchanged on the BSE.

 

The global cues are quite strong, with the primary driver being the de-escalation of Indo-Pakistan tensions, which has lifted the mood in Indian markets, according to Kranthi Bathini, Director - Equity strategy at WealthMills securities Pvt Ltd. Additionally, progress in the US-China trade talks has eased global trade tensions, further contributing to the current market optimism, he said.  "Following the de-escalation of tensions between India and Pakistan, Indian markets have become one of the most favoured destinations for foreign portfolio investors globally," Bathini said.  

 

Conditional ceasefire

 

After four days of fighting that risked transforming into an all out war, India and Pakistan agreed to a full and immediate ceasefire. Just hours after the truce came into effect, explosions were reported in Srinagar. 

 

It must be noted that an official ceasefire was not in place - an understanding of a ceasefire was reached.

 

External Affairs Minister S Jaishankar said that both nations have reached an understanding on "stoppage of firing and military action." In a post on X, Jaishankar said, "India and Pakistan have today worked out an understanding on stoppage of firing and military action. India has consistently maintained a firm and uncompromising stance against terrorism in all its forms and manifestations. It will continue to do so." 

 

US-China trade talk 

 

The domestic stocks took cues from rising global markets as reports indicated that the 'trade talks' between China and the US have made 'substantial progress'. Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer said that “Substantial progress” was made in this weekend’s US and China talks in Geneva. 

 

Chinese officials also said that a “sound sustainable development” was made, during a briefing on Sunday.

 

Bessent did not offer any details of reductions agreed and took no questions from reporters. Earlier, White House economic adviser Kevin Hassett said the Chinese were "very, very eager" to engage in discussions and rebalance trade relations with the United States.

 

Following this, Mainland China's CSI 300 was up 0.61 per cent, Hong Kong's Hang Seng was up 0.93 per cent and Japan's Nikkei was up 0.26 per cent. 

 

Ukraine hopes for truce

 

Elsewhere, the hopes of Ukrainian President Volodymyr Zelenksyy's full and temporary ceasefire with Russia also boosted sentiments globally as war tensions are set to ease. This came after US President Trump insisted Ukraine accept to Russia's latest offer of holding direct talks in Turkey this week. 

 

“I will be in Turkey this Thursday,” Zelenskyy said in his daily address to Ukrainians. “I hope that this time, Putin won’t be looking for excuses as to why he can’t make it. We are ready to talk, to end this war.”