Nifty surges 300 points as investor sentiment lifts markets. Will the rally last?

Time of India

23-05-2025

Despite a 300-point rally in the
Nifty
on Friday, Indian stock markets largely lacked clear direction over the week. However, experts remain optimistic about the market's prospects, citing resilience in the face of geopolitical tensions and tariff-related uncertainties. They anticipate the Nifty could deliver a strong outperformance, with potential gains of 12–15% going forward.
Prachi Deuskar, smallcase Manager and Co-Founder, Lotusdew, believes a 12%-15% growth is realistic in the current context. 'In Q4FY25, India's domestic demand recovery gained momentum, driven by strong rural consumption, favourable crop yields, and supportive government initiatives,' she said.
In her view, all equities are expected to outperform other asset classes.
The Indian markets shrugged tariff-related uncertainties following a pause announced by US President Donald Trump on April 7, just after a week of their implementation. Global markets, including India, benefited from the move with Nifty rising by 10% in the same period.
"Indian markets which were on the receiving end from past few months on FII selling, have shown a sharp rebound with 10% NIFTY returns in the past 6 weeks. 4Q25 results so far show better than expected corporate performance with EBITDA and PBT beat of 5.1/9.2% (Ex Oil & Gas) respectively," Prabhudas Lilladher said in a note.
Commenting on the current trends, Pankaj Murarka, CIO at Renaissance Investment, said that he has consistently maintained that we are in a bull market. "My simple definition of a bull market, drawn from the original Dow Theory, is that markets deliver positive returns on a full-year basis. I still firmly believe markets will yield positive returns on an annualised basis. That said, I've also been highlighting that this is a mature bull market—we're now in the sixth year since it began, right around the onset of the COVID-driven lockdowns," he said.
He said that India is arguably the best-placed market in the world today and believes earnings growth will recover starting this year, with Nifty potentially delivering low double-digit earnings growth, and markets generating similar returns.
After remaining net sellers for the January-March quarter, tables have turned in favour of the Indian equities. The FIIs bought equities worth Rs 19,272 on a month-to-date basis following a modest Rs 4,223 crore purchase in April.
However, the constructive stance of experts is not without caution.
Prabhiudas said that markets now seem to have digested the uncertainty related to global tariff wars on hopes of lesser disruption and trade agreements by major economies. It pointed out worries related to the Chinese economy and US interest rates, arguing that an end to global turmoil is still not in sight.
What to do?
"Our view on markets remains constructive. However, investors will need to be selective—picking the right sectors and stocks is crucial. At the index level, returns are likely to be in the high single digits to low double digits, which is still quite healthy for a mature bull market at this stage of the cycle," Murarka said.
Srivastava of Dimensions Corporate said that investors were buying stocks left, right and centre at PE above 50, which is worrying. "One should enjoy the ride, but be careful that you are not the one left in the party standing when the music stops and that is the crucial point here that in this environment you got to be very stock specific," he said.