Markets lift off after India, Pak jets are grounded; Sensex up 2,975 pts

Indian indices post their strongest single-day gains since 2021 as a truce with Pakistan and easing US-China tensions fuel optimism and boost investor confidence

Indian equity benchmarks skyrocketed on Monday, posting their largest-single-day gains in over four years, following a ceasefire understanding between India and Pakistan after four days of intense fighting. The de-escalation of trade tensions between China and the US also contributed to the positive sentiment.

 

Both the benchmark and broader indices recorded their best gains in years. The Sensex closed at 82,430, up 2,975 points or 3.7 per cent. The Nifty ended at 24,925, rising by 917 points or 3.8 per cent. For both indices, these were the highest since February 2021.

 

In terms of points gained, Monday's performance was the best ever.

 

 

The broader Nifty Midcap 100 rose by 4.1 per cent, its best single-day gain since June 5, 2024, while the Nifty Smallcap 100 jumped 4.2 per cent, its highest since February 25, 2022. The total market capitalisation of BSE-listed firms soared by over ₹16 trillion to ₹432.6 trillion. Investor optimism was also seen across the border, with Pakistan's equity benchmark KSE 100 surging 9.1 per cent. 

 

Investors were relieved as the ceasefire between India and Pakistan eased concerns about the economic impact of a potential war between the two nuclear-armed neighbours. The truce came after days of intense fighting involving missiles and drones.

 

"Ceasefire is the primary reason for the rally. It is natural for markets to react strongly to such developments. Going forward, we are cautiously optimistic, but much depends on the ceasefire holding," said Chokkalingam G, founder of Equinomics.

 

However, some experts believe Monday's rally was driven by a combination of geopolitical realignment, earnings acceleration, and easing trade tensions.

 

"Today's rally reflects broader optimism rather than just the Indo-Pak ceasefire. Last week's correction was mild and orderly, more of a breather after the March rally. The sharp bounce-back is rooted in improving fundamentals, not just sentiment. We are seeing resilient fourth quarter (Q4) earnings, steady performance in key sectors, and improving visibility for the next few quarters," said Harish Krishnan, co-CIO and head of equity at Aditya Birla Sun Life AMC. 

 

Global markets also rose after the US and China temporarily lowered tariffs on each other's products. The easing of trade tensions led to the strengthening of US assets. The dollar index rose 1.3 per cent to hit a one-month high of 101.6. The 10-year US bond yield increased by 1.75 per cent, trading at 4.45 per cent. Meanwhile, gold declined by 3 per cent, trading at $3,227.3 per ounce.

 

The market breadth was strong, with 3,541 stocks advancing and 582 declining. The India Vix index, a gauge of market volatility, fell 15 per cent to 18.4, snapping its four-session gain.

 

All sectoral indices ended with gains, with the IT stocks emerging as the best performers, spurred by optimism over the US economy. The Nifty IT index gained 6.7 per cent. On the other hand, the Nifty Pharma index underperformed, rising just 0.15 per cent following the US' move to lower drug prices.

 

Looking ahead, the remainder of the corporate results, sustainability of foreign portfolio investor (FPI) flows, stable monsoons, and potential trade deals with the US will provide further momentum to the market rally.

 

"Markets may consolidate from here, but the overall trend remains positive. The rally's sustainability will depend on earnings momentum, policy continuity, and continued global interest in India as an investment destination," said Krishnan.  FPIS were net buyers on Monday, worth Rs 1,246 crore, while domestic institutions were net buyers to Rs 1,448 crore.