Sensex, Nifty soar 10% in 2 months but can this bull run survive the shadows of war?

Time of India

02-05-2025

Even as geopolitical tremors rattle South Asia and tariff crossfires erupt across continents,
Indian stocks
are dancing to a bullish beat. In just two months, the
Sensex
has leapt 7,000 points while the
Nifty
has clocked a heady 10% gain, defying the dual overhang of a simmering India-Pakistan standoff and escalating global
trade tensions
.
What's fuelling this gravity-defying rally? Two big tailwinds: a sharply weakening dollar that sent the rupee soaring to a five-month high, and a plunge in global crude oil prices. Together, they've ignited a foreign investor buying spree of about $4.5 billion of net FII inflows in just 11 trading sessions.
'Markets have rallied significantly from the recent lows of 22,000 to currently trade around 24,300-plus,' said Aamar Deo Singh of Angel One. 'That has been a 10% rally in a very short span of time. So, somewhere or the other, stocks are definitely witnessing some profit booking as well.'
Singh added that Nifty could face resistance at 24,400, with the potential to rally toward 24,700–24,800 if that level is breached. 'It's a buy-on-dips market, but investors need to be slightly cautious at current levels given the sharp up move.'
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Still, markets appear to be discounting geopolitical escalation. Market expert Sudip Bandyopadhyay pointed out that 'the market is not factoring in any major flare-up.' He noted that most domestic and international investors remain focused on tariff issues, growth slowdown, and demand but not on India-Pakistan tensions. 'If there is a significant flare-up, there will be panic initially,' he warned.
Vikram Kasat of PL Capital echoed the sentiment, saying markets typically distinguish between political headlines and actual war risks. 'Historically, India-Pakistan tensions have caused temporary market dips, but markets tend to recover quickly if the situation doesn't escalate into full-scale war.'
PL Research is now valuing the Nifty at a 7.5% discount to its 15-year average PE (18.9x), arriving at a 12-month target of 25,521. Their bull case target is 27,590, while the bear case puts the index at 24,831.
But not everyone is convinced the rally is built on solid ground. Kotak Equities flagged concerns about 'complacency and optimism' driving the recent rebound. 'There is still large uncertainty on key issues—global growth, tariff/trade, and the US dollar—that will shape global and domestic markets,' the firm said. 'Multiples remain rich across sectors.'
Vinod Nair, Head of Research at Geojit, attributed the strong market performance to 'reduced tariff risks, a potential US-India trade deal, and strong FII inflows.' However, he cautioned that momentum is being capped by 'rising tensions between India and Pakistan and muted Q4 results.' Still, he believes any dip will be seen as a buying opportunity.
In the meantime, India's macro backdrop is drawing in capital. The dollar index (DXY) has slipped nearly 10% from its peak, and with RBI's easing cycle underway and US recession fears easing, the stars appear aligned—for now.
Emkay Global
summed up the sentiment: 'Tariff risks appear largely priced in, with the path ahead skewed toward constructive trade negotiations. The RBI easing puts India in a more favorable cyclical position, resulting in disproportionate flows versus other emerging markets.'
The bullish march has been fast and furious. But with war clouds lurking, the question isn't just how high this market can go—but how much turbulence it can withstand on the way up.
(
Disclaimer
: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)