The Indian stock market staged an impressive recovery on Monday, May 12, bouncing back from one of its weakest days in over a month. The optimism in the market surged following a ceasefire agreement between India and Pakistan announced on Saturday, alleviating concerns that had been weighing heavily on investor sentiment. Coupled with easing trade tensions between the U.S. and China, the market experienced a significant boost, particularly benefiting domestic technology stocks.
Market Rally Driven by Positive Developments
The recent developments have allowed the bulls to regain control of Dalal Street, resulting in the largest intraday gains for both benchmark indices in four years. This rally has propelled the market capitalization of companies listed on the BSE back above ₹5 trillion.
- Nifty 50 closed at 24,924, surging by 3.8% or 916.70 points.
- Sensex finished at 82,429 points, up 3.74% or 2,975 points.
- Broader indices also saw substantial gains, with the Nifty Midcap 100 rising 4.12% and the Nifty Smallcap 100 up 4.27%.
Ceasefire Agreement Eases Tensions
On Saturday, India and Pakistan announced a ceasefire, effective from 5 PM, aiming to halt all military actions across land, air, and sea. Experts noted the striking resilience of the Indian markets amidst the recent hostile environment.
As the situation stabilized, investor confidence returned, igniting a robust rally supported by significant inflows. This escalation in tensions was previously triggered by a terrorist attack in Pahalgam, Indian-administered Kashmir, which resulted in the deaths of 26 civilians. In retaliation, India launched "Operation Sindoor," targeting militant camps in Pakistan. Pakistan’s response included drone and missile strikes, which the Indian Army successfully neutralized.
U.S.-China Trade Agreement Boosts Market Sentiment
In another positive turn, the U.S. and China reached a preliminary agreement to de-escalate trade tensions by suspending most tariffs on each other’s goods for 90 days. This agreement, marking a significant step forward, aims to cut reciprocal tariffs from 125% to 10%. Although the U.S. will maintain 20% duties on certain Chinese imports related to fentanyl, the overall trade sentiment improved markedly.
Sector Performance: IT Soars
All 13 sectoral indices closed in the green, with the Nifty IT index leading the charge, climbing 6.70%—its most significant intraday gain in five years. The easing geopolitical tensions have also fostered hopes that the U.S. economic slowdown will not be as severe as previously feared. Other sectors like Nifty Realty, Nifty Metal, and Nifty Auto also recorded gains ranging from 3.40% to 6%.
Expert Insights on Market Trends
Vinod Nair, Head of Research at Geojit Investments Limited, commented, "The combination of positive geopolitical and economic developments—the ceasefire and the trade agreement—triggered this remarkable rally. The resolution of tariff issues has opened up new investment opportunities." Nair added that sustained foreign institutional investor (FII) inflows, along with increased retail participation, played a crucial role in today’s market surge.
Future Projections for Nifty 50
Looking ahead, Rupak De, Senior Technical Analyst at LKP Securities, mentioned that the Nifty’s recent performance indicates a positive trend, having broken out of a recent consolidation phase. He suggested that as long as the index remains above 24,350, any dips may attract buyers. The short-term targets for the Nifty 50 could reach between 25,350 and 25,750 as the momentum continues.
Investors are advised to stay tuned to market developments, as the optimism surrounding mid- and small-cap stocks is expected to persist amid these favorable conditions.
