Sensex rises 450 points, Nifty 50 settles at 25k; what drove Indian stock market higher? Explained with 5 key factors

Indian stock market witnessed healthy gains for the second consecutive session on Monday, May 26, with the benchmark Sensex rising over 450 points and the Nifty 50 reclaiming 25,000.

The Sensex opened at 81,928.95 against its previous close of 81,721.08 and jumped over 771 points, or almost 1 per cent, to an intraday high of 82,492.24. The NSE counterpart Nifty 50 opened at 24,919.35 against its previous close of 24,853.15 and rose nearly 1 per cent to an intraday high of 25,079.20.

Finally, the Sensex closed 455 points, or 0.56 per cent, up at 82,176.45, while the Nifty 50 settled 148 points, or 0.60 per cent, higher at 25,001.15.

The BSE Midcap and Smallcap indices rose 0.56 per cent and 0.48 per cent, respectively.

The overall market capitalisation of BSE-listed firms rose to near ₹445 lakh crore from nearly ₹442 lakh crore in the previous session, making investors richer by about ₹3 lakh crore in a session.

Why is the Indian stock market rising today?

Here are the five key factors that seem to have boosted domestic market sentiment:

1. Trump delays EU tariffs

Giving huge relief to the European Union (EU), US President Donald Trump postponed the planned 50 per cent tariff on imports from the bloc from the original date of June 1 to July 9.

As per media reports, Trump extended the EU tariffs deadline after a Sunday phone call with European Commission President Ursula von der Leyen, who, according to Trump, said that she “wants to get down to serious negotiations."

"The Indian stock market is rising today largely because of improved global sentiment after President Trump delayed the hefty 50 per cent tariffs on EU imports. That move brought a sense of relief across Asian markets, and India is riding the wave," said Trivesh D, COO Tradejini.

The EU is a key trading partner for India, and experts note that several Indian goods are routed through the EU for export to the US. This development also reduces the concerns about a trade war as it highlights the fact that the US wants to negotiate trade tariffs with its trading partners.

2. RBI's bumper dividend

The Reserve Bank of India (RBI) on Friday, May 23 said it would pay ₹2.69 lakh crore as dividend to the central government for FY25. This is the highest-ever surplus that the central bank will pay to the government.

Experts highlighted that the dividend will significantly boost the government's finances and help keep the fiscal deficit target for FY26 at 4.4 per cent.

"RBI’s bumper dividend payment to the government, exceeding the budget estimates, will help contain the fiscal deficit target for FY26 at 4.4 per cent. This, in turn, can sustain the low inflation and declining interest rate trend, which will continue to support the equity market," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

3. Dollar's weakness

The dollar index has been falling for three consecutive sessions, trading near its one-month low levels, which has underpinned sentiment in emerging markets like India.

The dollar's decline tends to increase foreign capital inflow in India and other emerging markets.

4. Favourable macro

India's macroeconomic landscape is conducive to the long-term growth of its domestic stock market. With inflation on a downward trajectory, the RBI has a strong case for further rate cuts. Meanwhile, the Indian economy is expected to remain one of the fastest-growing in the world.

India's Q4FY25 GDP growth may show a growth of 6.9 per cent, robust agricultural activity and service sector exports, according to a median estimate of 22 economists polled by Mint.

Meanwhile, NITI Aayog Chief Executive Officer (CEO) BVR Subrahmanyam said India has overtaken Japan to become the world's fourth-largest economy. He further said that in another two to three years, India may surpass Germany and become the third-largest economy in the world.

"Confidence was boosted partly by Q4 earnings, optimism around the RBI's record dividend to the government, and India officially becoming the world’s fourth-largest economy," said Trivesh.

5. Retail money

The market is seeing a strong influx of retail investors — a key factor that, according to experts, will help sustain its upward momentum.

"New retail investors continue to pour into the domestic markets. Last week also over six lakh new investors entered the capital markets for the first time. Thus, we firmly believe that the outlook for the Indian equity markets remains optimistic," said G Chokkalingam, Founder & Head of Research, Equinomics Research Private Limited.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.