Indian Equity Markets Rebound as Global Trade Fears Ease: 3 Factors Driving India–US Deal Hopes
Indian equity markets staged a strong rebound on Thursday, snapping recent nervousness as global risk sentiment improved and domestic sentiment received a boost from optimism around a potential India–US trade deal. Domestic benchmark indices Sensex and Nifty on Wednesday opened on a strong note and extended gains in the early trade, tracking a rally in global equities after US President Donald Trump backed off his initial plan of tariffs against China and ruled out the use of force over Greenland.
The rally is a convergence of falling geopolitical tensions, favourable global cues and some selective local support, even as investors remain wary of continued foreign fund exits, currency weakness and valuation concerns. The rebound in the Indian equity market highlights how closely domestic stocks are tracking global policy cues and trade developments.
Indian Equity Markets Rebound on Better Global Cues
The Indian equity markets opened on a positive note, taking cues from an overnight bounce in global markets. The BSE Centre Sensex was at 82,682.69, higher by 773.05 points or 0.94 per cent, and the NSE Nifty-50 jumped to trade beyond the key barrier of 25,400, up 245.35 pts or around one per cent near mid-morning. In the previous session, the Nifty settled 236.90 points or 0.95 per cent lower at 24,811.80, while the Sensex closed down by over 800 points.
Ahead of the market opening on Wednesday. The Nifty opened at 25,344.15, rising around 0.74 per cent and with a gain of nearly 550 points after starting trade, counting losses rapidly retreated from that high point. Gains on both indexes stood their ground through the day. Among sectors, metal and auto indices rose by up to half a per cent, while banks fell by over four per cent, among others.
The positive start followed a few days of turbulence in overseas and local equities, where issues related to trade concerns, geopolitical uncertainties and foreign portfolio investor (FPI) selling dominated headlines. Rally on Thursday suggested more of a tactical move back towards risk-on, led by external.
Markets steady after Trump teases softer stance on Greenland and EU tariffs
One of the prompting factors for the global bounce was US President Donald Trump’s decision to back off on threats to impose tariffs on European nations after talks around a framework deal on the Greenland issue. Trump said the tariffs, which had been expected to go into effect later this month, would not actually be imposed, lifting concerns about a new trade fight between the United States and its European allies.
The move provided relief to unsettled markets that had been disrupted by the prospect of trade disputes intensifying. Global stocks got a boost, and US stocks rose while Asian shares joined the trend. Investors took the move as a signal that tension would ease, though not for several weeks, lessening near-term downside risks to global growth and trade flows.
This return optimism was evident in the price action of Asian markets, which traded mostly higher. The Nikkei 225 in Japan increased nearly 2 per cent, while the KOSPI in South Korea rose more than 1.5 per cent, and Taiwan’s benchmark index was up about 2 per cent. Hong Kong’s Hang Seng index, however, was still under a touch of pressure, underlining that regional sentiment, though much improved, is still picky.
India–US Trade Deal Optimism Adds a Domestic Catalyst
In addition to relief from global trade tensions, Indian market players were encouraged by renewed optimism surrounding the India-US trade deal. Domestic investors were enthused, particularly after President Trump said that he was going to have a good deal with India, according to reports.
Traders saw the comments as an indication that bilateral trade talks could pick up in the next few months. An advantageous trade deal with the US, one of India’s main trading partners, would help exports, investments and by extension, economic growth. This story served as an important domestic tailwind at a time when investors have been concerned about deteriorating earnings growth and external pressures.
Experts noted that the combination of easing EU–US tensions and hopes of an India–US deal created the ideal backdrop for a relief rally in Indian equities.
Broad-Based Buying Across Market Segments
The rally on Thursday wasn’t restricted to the frontline indices, and broader markets also took part in the upmove. The Nifty 100 on the NSE added over 0.7 per cent, and the Nifty Midcap 100 more than 1.2 per cent. The Nifty Smallcap 100 also rose nearly 0.8 per cent, signalling improved risk sentiment among investors.
Sectorally, the gains were broad-based. The Nifty Auto index emerged as the top gainer, rising more than 1.2 per cent on buying in auto and ancillary stocks. The Nifty IT index added 1 per cent, taking cues from a weaker global macro outlook and prospects of steady demand from overseas clients. Metal, PSU Bank, and Pharma indices also traded higher, with most sectors opening firmly in the green.
The stock-specific action was also evident as a few large-cap and index heavyweights advanced up to 1-2 per cent in opening trade, which added support to the indices.
Institutional flows: DII buying counters, FPI selling
Despite the strong market performance in the Indian equity market, foreign portfolio investors remained net sellers in Indian equities. The overseas investors had pulled out shares valued at about Rs 1,680 crore in the previous session. Persistent FPI outflows have been a key theme for the past few weeks, on the back of global risk aversion, a robust US dollar and valuation concerns in India.
However, domestic institutional investors (DIIs) remained net buyers in the market by picking up shares worth more than Rs 4,180 crore. This constant domestic absorption has insulated the markets from foreign selling and avoided deeper reversals in benchmark indices.
Market observers say that although FPI flows remain an overhang, robust domestic liquidity being provided by mutual funds, insurance companies and retail investors continues to support the market.
Currency Pressures and Valuation Worry Linger
Although the rally on Thursday in the Indian equity market brought some relief in the near term, analysts warned that structural problems remain. The Indian rupee has tumbled to historic lows versus the dollar, sitting near the 91.7 level. A falling rupee raises fears of imported inflation and capital outflows, especially in a world of higher interest rates and a stronger dollar.
Analysts also mentioned that corproate earning revival has been delayed more than expected, resulting in a “time-wise correction” in valuations and not much of a price-driven sell-off. High valuations, particularly in certain parts of the market, are still cause for concern even as near-term sentiment improves.
Outlook: Rebound or the Core of a New Uptrend?
The key question for investors is whether the current rebound marks the beginning of a more sustained uptrend or merely a relief rally driven by global headlines. Much will depend on how global trade dynamics evolve, whether optimism around an India–US trade deal translates into concrete progress, and how domestic macro indicators, including earnings and currency movements, shape up in the coming weeks.
For now, easing geopolitical tensions and supportive domestic liquidity have provided the Indian equity markets with a breather. However, investors are likely to remain selective and vigilant, balancing opportunities arising from improved sentiment with the risks posed by global uncertainty, foreign fund outflows, and macroeconomic headwinds.
Also Read: India’s Economic Growth Outlook: 7 strong IMF Insights as Global Risks and AI Reshape Growth
