Sensex gains 800 points, Nifty above 27,750—What's driving today's rally
What's the story
Despite global uncertainties, India's stock market benchmarks—the Sensex and Nifty 50—are witnessing massive gains.
The BSE Midcap and Smallcap indices have also risen by up to 2% each.
As of 12:30pm on Tuesday, the Sensex was up by over 830 points to ₹75,000 while the Nifty had gained 244 points to trade at ₹22,752 points.
The overall market capitalisation of BSE-listed firms increased to over ₹397 lakh crore from ₹393 lakh crore in the last session.
Market analysis
Valuation comfort after recent correction
Experts attribute the rise in India's stock market to a number of factors. The domestic market is seeing buying due to valuation comfort, particularly in large caps after recent corrections.
Nifty 50's current PE (price-to-earnings ratio) is 20, which is near its three-month low.
Shrikant Chouhan, Head of Equity Research at Kotak Securities, said, "Looking at equity valuations, we have seen some relief due to the significant decline in expensive stocks."
Economic growth
Improving macroeconomic indicators
Macroeconomic indicators are flashing positive signs for the Indian economy.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, pointed out a few positive domestic cues.
These are a rebound in FY25 Q3 GDP growth to 6.2%, a surge in IIP by 5.1%, a 16% increase in gross tax collection, declining trade deficit, and a drop in CPI inflation to 3.6%.
Tariff concerns
Market's response to potential impact of Trump's tariffs
Indian investors are factoring a milder impact of Trump's tariffs on the market.
G Chokkalingam, Founder & Head of Research at Equinomics Research Private Limited, said "The US cannot antagonize both China and India at the same time due to strategic reasons."
He added "Trade wars cannot continue for a long. It may continue for another quarter or so, but the domestic equity market has already discounted largely by already declining a lot."
Currency trends
Strengthening rupee and falling dollar index
The Indian rupee is approaching its three-week high. In early trade on Tuesday, the local currency gained 10 paise to ₹86.71 against the US dollar.
The US dollar index, which gages the greenback's strength against a basket of six currencies, is trading near 103.5 and has declined by 4.5% this year.
A stronger rupee and a declining dollar index benefit the Indian stock market by reducing foreign capital outflows, easing inflationary pressures, and lowering import costs.
Monetary policy
Anticipation of RBI rate cut
With inflation falling below RBI's 4% target level, expectations are high the central bank may shift focus to supporting growth and cut benchmark policy rates significantly in the current cycle.
According to SBI Research Ecowrap, RBI is likely to slash the benchmark repo rate by a total of 75 basis points (bps) in 2025.
The RBI's Monetary Policy Committee (MPC) will meet from April 7-9 to decide on policy rates and its stance.