IIt is no surprise that the Indian stock market proposed a turnaround on Monday, suggesting that investors riding multiple active triggers have returned since February 2021, which brought the benchmark index to the best single-day growth. Sensex and Nifty both soared nearly 4% inside the vein, along the Indian-Pakis border, along the more installed trades, while again trading.
Sensex ended with 82,429.90, earning 2975.43 points or 3.74%. The 50-share index Nifty jumped 916.70 points, or 3.82% closed at 24,924.70.
Stocks in other Asian countries have also risen, celebrating U.S.-China deals to reduce tariffs. Hong Kong stocks rose about 3%, while China’s benchmark index jumped 1%.
The U.S. and China agreed to temporarily cut mutual tariffs in a deal that exceeded expectations as the world’s two largest economies attempted to end a destructive trade war that scared fears about recession and irritated financial markets, Reuters reported. The two countries said the U.S. would reduce its additional tariffs on Chinese imports from 145% to 30% in April, while China’s responsibilities for U.S. imports will be reduced from 125% to 10%. The new measures will be effective for 90 days.
Since taking office in January, U.S. President Donald Trump has raised tariffs paid by U.S. importers from China to 145%, in addition to the goods he imposed on many Chinese goods during his first term and the duties imposed by the Joe Biden administration.
According to Amar Ambani, executive director of securities, part of the Indian market is jumping due to the Indian-Pakistan ceasefire, but mainly because the United States and China have eased tariffs and negotiations are going well. “A 90-day trade deal window has cancelled sentiment and investors want the worst of the trade war behind us,” he said.
In response to the terrorist attacks in Pahargham in April, which claimed 26 lives, Indian armed forces conducted a 23-minute precision strike in Pakistan-occupied Kashmir and Pakistan’s Punjab province on May 7, targeting nine locations and underway on May 7.
Worries and uncertainties remain
Even though the market shows resilience, the market shows resilience, people are still worried about whether the rally will last. Company revenue and steep valuations in the January-March quarter do not provide comfort for market gatherings.
“Q4FY25 earnings have faded, while most sectors and stocks are still well-valued,” said Sanjeev Prasad, MD, MD, Kotak Institutional Equities.
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Despite rising global and local uncertainties, the Indian market has performed well over the past month. Prasad’s reasons show that strong performance shows that markets are rapidly addressing ongoing trade and tariff issues, while U.S. and geopolitical risks are under control.
“In this case, the escalation of the conflict between India and Pakistan may have a limited boost to investor sentiment, while the risk-rewarding balance between improved macro, weak revenue growth prospects, further lower returns and increased valuations,” he explained.
In this past border conflict, the Indian stock market has not been significantly affected, but the economy has been adversely affected, showing data analysis by JM Financials. “But the Indian economy is now bigger than the previous conflict and more resilient than the previous conflict,” said JM Financial Research, Research, Research, Venkatesh Balasubramaniam.
In most events, short-term movements (within three days after the war begins) and long-term movements (until the end of the war) remain within the range of 3% to 4%. Analysis shows that in the major border skirmishes in the past, the shortcomings were limited.
During the 1962 Indian-China War, GDP fell by 0.8%. A similar trend was seen after the Indian-Parker War in 1965, when GDP fell 2.6% after a 7.5% increase in the previous year.
The 1999 Kagill War seemed the only case in which GDP grew to 8.9% in the war year, compared with 6.2% in 1998.
Institutional currency flow
In April, both foreign institutional investors (FII) and domestic institutional investors (DIIS) were net buyers in the Indian stock market, at $530 million and $3.3 billion, respectively. This marks a long sales craze, which marks the second consecutive month of FIIS purchases.
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Common equity inflows stabilized at Rs 269,000 crore in April, showing the correlation of mutual funds in India (AMFI) data. The monthly system’s investment plan (SIP) inflow was Rs 26,600 crore, but the SIP stop ratio also increased at an alarming rate. Monthly SIP inflows increased by 31%, up 3% from March.
The SIP stop ratio is the SIP account interruption with the SIP account opening a new SIP account. In April, the SIP cessation ratio rose sharply to 298% and complied with regulatory directives due to settlement exercises conducted by registrars and transfer agents.
Bond Market
In the fixed income space, the U.S. fiscal market has been seeing volatility, initially falling yields, and then rising dramatically due to the mutual tariffs imposed by the U.S. on all countries. Although the yields of the U.S. Treasury narrowed by 4 basis points (BP) this month, the volatility of reciprocity tariffs and their uncertainties led to fluctuations in bond yields. Within a week, yields rose from the 4% level to 4.5% after the U.S. government announced tariffs.
According to analysts at Axis mutual fund, the U.S. will see its growth slower, while the U.S. Federal Reserve may drop by 50 to 75 basis points. However, tariffs may reduce growth, which could mean a reduction rate cycle of 75 to 100 bps.
“India will also witness slower growth, but the goods that make the country good are limited exports to the United States, but exports of services to the United States are a higher component. The 90-day pause, while giving recent respite, can expand trade policy uncertainty, which may reduce investment and consumption,” they added.
