Sensex, Nifty rise 1.5% in relief rally; will this rebound sustain?

Indian equity market rebounded over 2% in intraday trade on Tuesday in a relief rally after a sharp sell-off in recent past, which was triggered by U.S. tariffs and its impact on global economic growth. Reversing three-session losing streak, the Sensex closed above 74,000 mark and the Nifty reclaimed the 22,500 level in a broad-based rally, led by banks, capital goods, IT, FMCG, oil&gas, and realty stocks. Analysts believe that the trend reversal is temporary, driven by a global market recovery and optimism over potential easing of U.S. trade tariffs, and remained uncertain about sustainability of this rebound.

“The sustainability of this rebound remains uncertain, hinging on global trade developments, the Reserve Bank of India's monetary policy, and ongoing market volatility, necessitating cautious investor sentiment,” says Jaison Davis, Economic Research Analyst at GlobalData, a data and analytics company.

Davis further said that the outlook for the Indian stock market remains mixed, with short-term volatility expected as investors assess the implications of the tariffs and await developments in trade negotiations. The sectors heavily reliant on the U.S. market, such as IT and textiles, may face challenges immediately, while domestic demand-driven sectors like FMCG and infrastructure could show resilience, he added.

Market snaps 3-day fall

Today, the Indian equity market witnessed a significant upturn, with the BSE Sensex rising as much as 1,721 points, or 2.35%, to reclaim 74,859 level. Similarly, the Nifty50 surged 535 points, or 2.4%, to hit an intraday high of 22,697. The broader market also saw strong buying, with the BSE midcap and smallcap indices, soaring as much as 2.7% each in intraday trade.

Paring some of early gains, the 30-stock Sensex ended at 74,227, up by 1,089 points or 1.49%, and the Nifty50 rose 374 points, or 1.69%, to close at 22,536. In the broader markets, BSE Midcap and Smallcap rallied 1.87% and 2.18%, respectively. The market capitalisation of the BSE listed companies rose by ₹8 lakh crore to ₹3.97 lakh crore.

In the BSE Sensex pack, barring PowerGrid, all the Sensex constituents closed in green zone. The top gainers were Titan, Bajaj Finance, Larsen & Toubro, State Bank of India, and Axis Bank, rising up to 3%.

Will global growth scare prolong risk-off mood?

Analyst at Motilal Oswal Financial Services opines that equity market volatility is being amplified by sharp moves in macro indicators—crude has dropped 18% since January, U.S. 10-year yields have corrected around 90 basis points, and global indices like the S&P and NASDAQ are down 17–23% from December highs. These swings affect liquidity and investor sentiment.

“A global growth scare or policy misstep could prolong the risk-off mood. Conversely, any stabilisation in U.S. inflation and trade talks may trigger a rebound in FII sentiment—where India could emerge as a preferred market owing to its relative macro stability and domestic demand strength,” the report noted.

Foreign Institutional Investors (FIIs) have withdrawn nearly $26 billion over the past six months amid global volatility. However, this has been offset by robust domestic flows—particularly through SIPs—which have contributed nearly $45 billion in the same period. This strong retail participation reflects a deeper and more resilient domestic equity culture that continues to provide downside protection during periods of foreign exodus, Motilal said in its report.

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