Will a fragile India-Pakistan ceasefire spark a stock market rally? 5 signs to read

Economic Times

11-05-2025

Despite heightened tensions at the borders, the announcement of an India-Pakistan ceasefire is expected to set Indian markets on an upward trajectory this week. The markets, which had been recovering from a recent correction, took a hit as tensions between the two countries escalated.
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Despite heightened tensions at the borders, the announcement of an India-Pakistan ceasefire is expected to set Indian markets on an upward trajectory this week. The markets, which had been recovering from a recent correction, took a hit as tensions between the two countries escalated. Headline indices Sensex and Nifty fell over 1% on Friday. THowever, it should be noted that the Indian government has said Pakistan violated the ceasefire agreement along the Line of Control (LOC) and the situation remains evolving by the minute.During the conflict, the stocks showed resilience with no major correction, which indicates strong underlying confidence. The ceasefire news is likely to further bolster that and support a market rebound."With the announcement of a ceasefire, the lingering fear among investors is expected to ease further. As a result, we anticipate a positive start to the week," said Shruti Jain, Chief Strategy Officer, Arihant Capital Markets India and Pakistan agreed to a ceasefire on Saturday after experiencing their worst fighting in decades. For four days, the two nuclear-armed neighbors exchanged missile, drone, and artillery strikes. The ceasefire was first announced by US President Donald Trump, who claimed that the United States had acted as a mediator. However, India denied that the US played a role in brokering the agreement.The conflict began after terrorists killed 26 people in a tourist area on the Indian side of Kashmir last month. Following this, India on the night of May 7 launched precision strikes against terror infrastructure.Prashanth Tapse of Mehta Equities noted that the ceasefire between India and Pakistan marks a significant diplomatic and strategic victory for India in its fight against terrorism."This de-escalation removes a key overhang on investor sentiment and is likely to be seen as a major positive development by financial markets," he said.History too favours a rebound, where markets have shown a tendency to recover following such geopolitical de-escalations."A gap-up opening of 200–300 points on the benchmark indices is expected on Monday, as investor confidence returns. However, volatility is likely to persist, driven by the ongoing earnings season and global uncertainties—especially tariff-related developments," Tapse said.Technically, Nifty held above 24000 and now 23500 mark becomes a key make-or-break support, according to various analysts."On the upside, immediate resistance lies between 24250 and 24300. A broader recovery may only unfold once Nifty decisively surpasses the stiff hurdle at 24600, which marks the 61.8% retracement of the fall from all-time highs," said Rajesh Bhosale, Equity Technical Analyst, Angel One.Here are 5 signs to read about the impact of India-Pakistan ceasefire on marketsCeasefire announced after Intense fighting: India and Pakistan agreed to a ceasefire on Saturday following four days of intense conflict.Markets likely to rebound: Despite recent market volatility, the announcement of a ceasefire is expected to support a market rebound this week.Stocks showed resilience during conflict: Indian stocks showed resilience even during the border tensions, experiencing no major correction.Sentiment booster: Analysts like Prashanth Tapse of Mehta Equities believe the ceasefire marks a strategic victory for India and removes a key overhang on investor sentiment. The de-escalation is seen as a positive development for financial markets.Technical levels to watch: Nifty is expected to find strong support at 23,500, while resistance lies between 24,250 and 24,300.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)