Sensex's 2700-point rally adds ₹13 lakh crore to investor wealth: Where should smart investors put their money now?

Mint

12-05-2025

Indian equities rebounded sharply on Monday, May 12, reversing Friday's losses amid easing geopolitical tensions and renewed global optimism. The benchmark indices posted their best single-day gains in months, buoyed by a ceasefire between India and Pakistan, hopes of de-escalation in global conflicts, and encouraging trade talks between the US and China.
The BSE Sensex jumped 2,709 points, or 3.4 per cent, to hit the day's high of 82,163.49, while the Nifty surged 844 points, or 3.5 per cent, to 24,852.15. With the rally, the total market capitalisation of all listed companies on the BSE rose by ₹ 13.46 lakh crore, touching ₹ 430.47 lakh crore.
The rally followed positive news over the weekend, as India and Pakistan agreed to a ceasefire after four days of intense cross-border military escalations. This truce, although fragile, held through Sunday, reducing investor anxiety that had built up due to the conflict—the most severe in decades.
Investor sentiment was also lifted by global developments, including the announcement of fresh tariff negotiations between the US and China in Geneva and peace talks between Russia and Ukraine, scheduled in Istanbul. These factors helped boost confidence across global markets and encouraged risk-on trades in India.
'The market is trading higher today, driven by a wave of favourable geopolitical developments that have underpinned overall investor optimism,' said Swapnil Aggarwal, Director at VSRK Capital. He noted that the India-Pakistan ceasefire was key in reducing regional uncertainty. Simultaneously, diplomatic steps between Russia and Ukraine, and renewed US-China dialogue, suggested the potential for broader global stability.
'Combined with these international cues, the domestic macro environment—driven by strong mutual fund flows and an upgrade to India's sovereign credit outlook—further fuelled market gains,' he added.
While Monday's gains were substantial, market experts caution against complacency, especially given the temporary nature of geopolitical truces.
Manish Goel, Founder and MD of Equentis Wealth Advisory Services, emphasised India's macroeconomic resilience amid recent volatility. 'Fundamentals of our country are very strong. Recent inflation and PMI data reaffirm this strength,' he said, acknowledging that border tensions and global trade concerns had heightened uncertainty in recent weeks.
He advised investors not to be rattled by short-term corrections. 'History shows markets correct nearly every year yet recover, often swiftly. Investors who treat these dips as buying opportunities, not exit signals, tend to benefit the most,' Goel added.
His strategy: Maintain a 10 per cent allocation to cash or low-volatility assets to capitalise on steep corrections. 'It's not about timing the market—it is about being prepared to act when it matters most.'
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted that the India-Pakistan ceasefire has cleared the way for a sharp rally in equities, with foreign institutional investors (FIIs) likely to return in full force.
He pointed out that FII buying had been consistent for sixteen straight sessions until Friday, when the border tensions escalated. 'Domestic macros like expectations of high GDP growth, earnings revival in FY26, declining inflation, and interest rates augur well for a continued rally,' he said.
According to Vijayakumar, large-cap stocks remain the primary focus for institutional investors. He listed ICICI Bank, HDFC Bank, Bajaj Finance, RIL, L&T, Bharti Airtel, Ultratech, M&M, and Eicher Motors as potential leaders of the current rally. He also highlighted midcap IT and digital stocks as promising sectors in the near term.
However, he cautioned that pharma stocks may face near-term headwinds following a US policy announcement aimed at reducing drug prices, which could affect export profitability.
Commenting on global trade dynamics, Vijayakumar said a potential US-China trade deal would benefit the global economy overall, although it might disappoint Indian exporters who had hoped for bilateral progress with the US ahead of China.
Overall, Monday's market rally was a powerful reflection of how quickly investor sentiment can shift when geopolitical risks ease and global macroeconomic prospects improve. With a ceasefire in place, global peace talks underway, and renewed trade negotiations raising hopes for reduced friction, equity markets found fresh momentum. While volatility may persist due to the evolving nature of these developments, analysts continue to see long-term strength in India's economic fundamentals. Investors, they suggest, should use corrections as opportunities and remain focused on high-quality companies poised to benefit from structural growth trends.