Indian stock market: Sensex, Nifty 50 climb to 2025 high, just 2.7% away from record peak. Can they hit new milestones?

The Indian stock market weathered twists and turns in June but staged a strong comeback, bringing the frontline indices just steps away from reaching new record highs.

The Nifty 50, after hitting a one-month low of 24,473 on June 13, the day Israel attacked Iran’s nuclear sites, has since added 1,076 points, or 4.4%, reaching 25,549, the highest level of 2025. It is now just 2.7% away from its September peak of 26,277.

Its peer, the Sensex, has also gained 3,505 points from the June 13 lows, climbing to a 2025 high of 83,755. The index is now just 2.6% away from breaking its September peak of 85,978.

What led to a strong recovery in the Indian stock market?

Despite a lack of progress on the India–US trade deal, escalating tensions in the Middle East, and sharp volatility in crude oil prices, the bulls did not lose confidence in local equities and managed to overcome each obstacle.

The renewed interest in quality large-cap stocks—amid stretched valuations in the mid- and small-cap segments—has provided the fuel for a strong rebound. Despite valuation concerns, the broader markets have also participated in the latest rally.

Although the Iran–Israel war had limited direct impact on Indian markets, as the country is not heavily dependent on Iranian crude, the temporary ceasefire brokered by the US and Qatar on June 24 brought fresh optimism.

The temporary halt led to a sharp drop in crude oil prices and eased concerns over supply shortages and the potential closure of the Strait of Hormuz, a critical chokepoint through which roughly 20% of the world’s oil supply passes.

Oil has swung in a range of about $15 a barrel this week after prices spiked on Monday following the US bombing of Iranian nuclear sites, before President Donald Trump declared a ceasefire on Tuesday. Crude prices have dropped 11% this week, and are on track to record their worst weekly drop in the last two years.

Meanwhile, the softness in the US dollar has also added another leg to the rally in domestic equities, as a falling dollar typically leads to lower commodity prices. The sustained drop in the greenback has also led to expectations that will drive more overseas inflows into Asia's third-largest economy.

On Thursday, the Dollar Index dropped to a three-year low of 97 against a basket of major currencies, as expectations grew that the US economy could see an acceleration in rate cuts. 

This came amid speculation that President Donald Trump may announce his pick for the next Fed Chair as early as September or October, potentially creating a “shadow” leadership structure that could steer monetary policy in a more dovish direction.

On the domestic front, the trade truce between India and the US has been progressing slowly. Amid this, the latest reports suggest that India is expected to push for an extension of the exemption window from Trump’s reciprocal tariffs, which are scheduled to take effect from July 9.

New Delhi and Washington are still negotiating a mini trade deal, as part of a scaled-down Bilateral Trade Agreement (BTA), which is likely to be finalized by September, according to media reports.

Will the rally in the Indian stock market hold further?

Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that a key hallmark of the ongoing bull market, which began after the Covid-led crash on March 23, 2020 (when the Nifty hit 7,511), is its ability to "climb all walls of worries."

He pointed out that despite headwinds such as high inflation, aggressive monetary tightening by central banks, geopolitical tensions including wars and conflicts, and even unprecedented tariff threats, the market has continued to rally. “It appears that the rally is unlikely to be impacted by the approaching July 9th tariff deadline imposed by President Trump. News that the July 9th deadline is likely to be extended is a positive for the market,” he added.

Vijayakumar also highlighted the sustained weakness in the US dollar as a significant development, with the dollar index slipping to around 97. He said this has likely contributed to the strong foreign institutional investor (FII) inflows of ₹12,594 crore on Wednesday, a substantial figure, even though it includes some bulk deals.

“This big FII buying has lifted large caps like HDFC Bank, ICICI Bank, Bharti, RIL, and Bajaj Finance, which in turn, has contributed to the sharp spike in the benchmark indices,” he said. While the market momentum remains strong, he cautioned that some near-term profit booking is likely.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.