Despite US tariff policy and worldwide geopolitical tensions, India's stock market benchmarks, the Sensex and Nifty 50, saw notable increases on March 18, with the Sensex surging more than 800 points and the Nifty 50 reaching 22,750.
India's stock market benchmarks, the Sensex and the Nifty 50, rose with strong gains in early trade on Tuesday, March 18, despite the world's unrest caused by US President Donald Trump's aggressive tariff policies and a new strain in international tensions.The Nifty 50 recovered 22,750 amid widespread purchasing, while the Sensex surged more than 800 points. The BSE Smallcap and Midcap indices surged to 2%.
At approximately 11:25 AM, the Nifty 50 was up 242 points, or 1.07 percent, at 22,750, while the Sensex was up 839 points, or 1.13 percent, at 75,009.
Investors gained over ₹4 lakh crore in a single session as the total market capitalization of BSE-listed companies increased from ₹393 lakh crore to over ₹397 lakh crore.
Simmering tensions in the Middle East have presented additional difficulties for global stock markets, even as the world struggles with economic uncertainties brought on by the trade war.
US President Donald Trump reportedly declared Monday that he will hold Iran fully responsible for any future attacks by the Houthi rebels in Yemen, who are backed by Tehran and have attacked the US and other foreign ships in the Red Sea.
Why is the stock market in India growing?
The following five elements were identified by experts as potential drivers of the Indian stock market's rise:
1. Comfort in valuation following the recent correction
Because of valuation comfort, the domestic market is seeing purchasing, particularly in large caps following the recent downturn.
At 20, the Nifty 50's price-to-earnings ratio is currently close to its three-month low.
According to Kotak Securities' head of equity research, Shrikant Chouhan, "looking at equity valuations, we have seen some relief due to the significant decline in expensive stocks."
At this point, investors seem to have been enticed to accumulate a number of equities due to their appealing prices.
2. Enhancing the macro image
The Indian economy is beginning to show positive signs according to macroeconomic data.
Positive domestic indicators were highlighted by VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. These included a recovery in FY25 Q3 GDP growth to 6.2%, a spike in the IIP of 5.1%, a 16 percent increase in gross tax collection, a decreasing trade deficit, and—most importantly—a decrease in CPI inflation to 3.6%. These positive macroeconomic developments, he said, are encouraging for the market.
Market sentiment is being influenced by the country's improving macroeconomic outlook, which has sparked expectations for an earnings recovery starting in the upcoming quarter.
3. The market is discounting that Trump's tariffs will have a less impact.
While Trump's tariffs are undoubtedly a worry, Indian investors seem to be accounting for the possibility of a less severe effect.
"For geopolitical reasons, the US cannot simultaneously enrage China and India. Trade battles can't go on forever. Even if it might go on for another quarter or two, the domestic stock market has already depreciated much due to its sharp decline. Furthermore, India does not play a significant role in the US goods account trade imbalance. According to G Chokkalingam, Founder & Head of Research at Equinomics Research Private Limited, "India is addressing some of the concerns of the US."
"The US's economy and markets would be severely weakened if the trade war were to continue for much longer. As a result, we anticipate that the intensity of trade battles may decrease in the next quarter or two," Chokkalingam stated.
4. The rise and fall of the rupee in the dollar index
The Indian rupee is currently trading close to its peak of three weeks ago. The local currency increased 10 paise to 86.71 versus the US dollar in early Tuesday's trading. The US dollar index, which compares the strength of the US dollar to a basket of six other currencies, is currently trading close to 103.50. The dollar index has down 4.5% so far this year.
The Indian stock market benefits from a stronger rupee and a declining dollar index because they may reduce outflows of foreign capital or perhaps spur new purchases. They also reduce import prices and lessen inflationary pressures.
5. The RBI rate decrease is anticipated
There are considerable expectations that the central bank will change its attention to promoting growth and drastically lowering benchmark policy rates in the current cycle now that inflation has dropped below the Reserve Bank of India's 4% target level.
The Reserve Bank of India (RBI) is expected to lower the benchmark repo rate by 75 basis points (bps) in 2025, with 25 bps reductions scheduled for the policy meetings in April, June, and October, according to State Bank of India (SBI) Research Ecowrap.
To determine policy rates and its position, the RBI's Monetary Policy Committee (MPC) will convene from April 7 to 9.
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