Nifty 50, Sensex surge over 7% since 7 April low as FPIs return

Indian benchmark indices continued the rally on Thursday, surging more than 7% since their recent lows amid Trump’s tariff flip-flops.

The Nifty 50 index closed 1.77% higher on Thursday, up 414.45 points at 23,851.65. Sensex closed 1.96% up at 78,553.2. Since its last intraday low of 21,743.65 on 7 April, Nifty 50 index has recovered 7.43%.

The Indian benchmarks had fallen more than 5% since US President Donald Trump announced tariffs on 2 April. After Trump paused tariffs on all trading partners except China, the subsequent rally in Nifty 50 erased the losses by 15 April and has since extended gains.

FPI buying drives momentum

Foreign portfolio investors (FPIs) were net buyers for the third consecutive day on Thursday, snapping up shares worth ₹4,668 crore, according to provisional data by NSE. In the last three days, FPIs have net bought equities worth ₹15,492 crore. Domestic institutional investors (DIIs) were net sellers during the period, offloading shares worth ₹6,470 crore.

Read more: For Wipro, tariff-led macro uncertainty makes things messy

“FIIs have been net buyers in the market for the past three days—something that’s quite rare in the last six months,” said Alok Agarwal, head of quant and fund manager at Alchemy Capital Management.

Banking, financial services and insurance or BFSI remains the top sectoral allocation in FPI portfolios, largely due to its high weight in benchmark indices, said Agarwal. With the Reserve Bank of India cutting interest rates and several banks reducing deposit rates, the sector is seeing a cost advantage, he said.

“Multiple factors such as rate cuts, improved margins, and potential FII buying, appear to be aligning in favour of the banking and financial sector, possibly driving recent market momentum in that space," said Agarwal.

The top stocks that moved Nifty 50 on Thursday were ICICI Bank Ltd, Reliance Industries Ltd, HDFC Bank Ltd, and Bharti Airtel Ltd. The top Nifty sectoral movers included financial services, oil and gas and telecommunications.

The broader Nifty 500 and BSE 500 indices both closed 1.31% higher.

The domestic markets tracked Asian peers. Hong Kong's Hang Seng ended 1.61% higher, while Kospi closed 0.94% up and Shanghai Composite ended 0.13% higher.

Still, Nifty 50 is 9.02% below its all-time high in September, when foreign investors began selling on valuation concerns and earnings slowdown. US President Donald Trump’s tariff uncertainty added to the selling. He imposed sweeping tariffs on trading partners on 2 April, including 26% on India, but later paused the levy. However, the US and China remain engaged in a tariff war.

The Reserve Bank of India (RBI) is concerned about the impact of the ongoing tariff war, governor Sanjay Malhotra said on 9 April after the RBI's Monetary Policy Committee reduced the benchmark lending rate and eased its stance.

“Expectations of further policy easing due to domestic inflation dropping to 67-month lows, improvement in banking liquidity and talks of negotiations between the US and countries impacted by trade tariffs have fanned optimism among market participants,” said Akshay Chinchalkar, head of research at Axis Securities.

India's retail inflation eased in March to its slowest pace in over six years since August 2019 on the back of lower food prices, showed provisional government data released on Tuesday. Retail inflation, based on the Consumer Price Index (CPI), rose 3.34% annually in March, lower than the 3.61% registered in February and 4.85% reported in the year-ago period.

Chinchalkar said expectations of strong results, a benign liquidity scenario, FPI buying in large-caps and a muted fallout of the tariff war for India—at least so far—has kept the spirits up.

Others said that while investors need to observe how tariff negotiations play out, they must watch out for the impact on currencies and credit markets.

“Countries would look to offset the impact of tariffs by more supportive monetary and fiscal policies,” said Ashish Gupta, chief investment officer, Axis Mutual Fund. “However, if bond yields continue to move up as seen in the last month, the ability to undertake expansion of fiscal and accommodative monetary policy will be constrained. One also need to look at earnings growth momentum in the current results season.”

Since 1 January, the Dollar Index has fallen 9.06% and 4.16% since Trump announced tariffs on April 2.

While Trump has upended global trade with his tariff flip-flops, India seems to be better placed than some of the other economies. Moody’s Ratings said in a report on Wednesday that India’s economy is likely to weather the latest wave of US tariff hikes with only limited fallout. But it warned that broader global trade tensions could weigh on economic growth and credit conditions worldwide.

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