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Sensex jumps 2,100+ pts, Nifty nears 24,700 as India-Pak tensions ease and US-China trade talks progress
The Indian stock market soared on Monday, May 12, 2025, after tensions between India and Pakistan cooled and positive signals emerged from US-China trade discussions. Both benchmark indices, the BSE Sensex and the NSE Nifty50, traded sharply higher as investor sentiment improved significantly.
At the time of writing, the BSE Sensex surged 2,145.98 points or 2.70% to reach 81,600.45. The Nifty50 gained 678.85 points or 2.83%, climbing to 24,686.85. Strong buying across sectors and lower volatility pushed market indices to new intraday highs.
Geopolitical Relief Boosts Markets
Last month’s terror attack in Kashmir had triggered strong military responses from both India and Pakistan, leading to fears of a prolonged conflict. Over the weekend, diplomatic channels managed to bring both countries to a mutual de-escalation. The easing of war fears removed a major overhang on Indian equities.
The India VIX, which measures expected market volatility, dropped by 20.46% to 17.79, the lowest since late April. The sharp fall in volatility reflects improved investor confidence and reduced fear of unexpected market swings.
US-China Trade Talks Add to Optimism
In addition to domestic geopolitical relief, progress in trade talks between the United States and China contributed to the global market rally. Both nations confirmed they had resolved key tariff-related disagreements, creating a supportive global sentiment. This news lifted Asian and European equities, offering a favorable backdrop for Indian markets as well.
Global investors welcomed the developments and continued to flow money into emerging markets. India's improving macroeconomic stability and the easing of external tensions have strengthened the country’s position among global peers.
Sector-Wise Performance
The rally on May 12 remained broad-based, with almost every sector trading in the green. Stocks from banking, information technology (IT), auto, real estate, and metal sectors led the surge.
Banking and Financials
Banks saw major gains as falling volatility and stable bond yields improved outlooks for credit growth and asset quality.
HDFC Bank, ICICI Bank, and State Bank of India (SBI) each gained between 2.5% and 4%.
Axis Bank rose sharply after analysts maintained positive outlooks based on rising loan demand.
Information Technology (IT)
IT stocks gained on hopes of easing trade restrictions and better outsourcing demand as US-China relations stabilized.
TCS, Infosys, and Wipro all advanced more than 2%.
Analysts expect the sector to benefit from an increase in tech investments from global clients.
Auto and Real Estate
Auto stocks rallied as consumer sentiment showed signs of recovery.
Maruti Suzuki, Tata Motors, and Mahindra & Mahindra were among the top gainers.
The real estate sector rose as interest rate expectations remained unchanged and home loan demand stayed firm.
Metals and Energy
Metal stocks advanced as global commodity prices rebounded.
Tata Steel, JSW Steel, and Hindalco posted gains of more than 3%.
Reliance Industries and ONGC added strength to the energy index with modest but steady gains.
Broader Markets and Small-Cap Rally
Not just the large-cap indices, but mid-cap and small-cap stocks also saw strong buying interest. The Nifty Midcap 100 and Nifty Smallcap 100 rose over 2% each, reflecting broad-based investor confidence across the market spectrum.
Market breadth remained extremely positive, with more than 80% of the traded stocks closing in the green during the morning session. Trading volumes surged as investors rushed to enter positions amid improved sentiment.
Global Market Overview
Asian markets traded higher, following strong cues from Wall Street and the easing geopolitical risks in South Asia. The Shanghai Composite, Nikkei 225, and Hang Seng Index all posted gains ranging between 1.5% and 3%.
European markets opened higher, tracking gains in Asia and the United States. The progress in US-China trade discussions and relief in the South Asian region helped boost global risk appetite.
Pakistan Stock Market Reacts to Peace and IMF Aid
While Indian indices surged, Pakistan’s stock market also celebrated the diplomatic breakthrough. The KSE-30 Index, Pakistan’s stock benchmark, jumped by 9.2%, the biggest one-day gain since 2008.
Trading on the Pakistan Stock Exchange (PSX) halted temporarily after stocks hit the upper circuit limits. The rally followed not just the peace talks but also the approval of a $1.4 billion loan package from the International Monetary Fund (IMF). This dual boost of financial aid and easing tensions created a strong bounce in investor confidence.
Currency and Bond Market Update
In the currency market, the Indian Rupee strengthened against the US Dollar, supported by foreign fund inflows and reduced geopolitical pressure. At mid-day, the Rupee traded around ₹82.03 per USD, up from last week’s levels.
The bond market also showed stability, with the 10-year benchmark government bond yield remaining around 7.12%. Lower inflation expectations and RBI’s neutral stance have helped bond yields stay within a narrow range.
Outlook for the Week
The market outlook for the week ahead appears positive but cautious. Investors remain optimistic about continued peace in South Asia and further progress in global trade talks. Key triggers to watch include:
Inflation data is expected later this week
US economic indicators, including retail sales and industrial output
Market participants will also monitor any unexpected geopolitical developments. For now, risk appetite has returned, and the sentiment seems set to remain constructive.
Indian equity markets opened the week on a strong note, backed by easing geopolitical tensions with Pakistan and positive developments in global trade. The Sensex and Nifty posted sharp gains, and broader market indices followed suit.
Falling volatility, improving foreign inflows, and sector-wide participation have lifted investor morale. With global risks reducing and macroeconomic conditions stabilizing, Indian markets appear well-positioned to sustain their momentum, barring any sudden shocks.