Nifty 50 tops 25,000, hits 7-month high; Renewed investor optimism in India's markets

India’s benchmark indices surged on Thursday, with the Nifty 50 closing at 25,062.10, its highest level in seven months, amid easing geopolitical tensions and expectations of foreign inflows tied to a key index rejig. The Sensex also climbed 1.5% to 82,530.74, marking its best performance since October.

The rally, which coincided with the weekly derivatives expiry, pushed NSE’s turnover to ₹1.28 trillion, the highest since March-end. Large-cap stocks were the clear winners of the day, significantly outperforming midcaps and smallcaps.

What’s Driving the Market?

Geopolitical Relief: A ceasefire between India and Pakistan helped lift market sentiment after weeks of tension.

US-India Trade Optimism: Sentiment also got a boost from US President Donald Trump’s statement about a “zero-tariff” trade offer from India, though India later clarified that trade talks are still “complicated.”

MSCI Index Changes: Portfolio adjustments ahead of MSCI India’s index rebalance on 30 May have likely triggered passive inflows. Nuvama’s Abhilash Pagaria estimates $200 million in FII inflows due to the changes, which will see two new stocks added, bringing the total to 159.

India maintains a strong presence in the MSCI Emerging Market Index, with a 19.5% weight—second only to China.

Sector Highlights

All sectors closed in the green, with Nifty Auto and Realty rising 2% each. Heavyweights like Reliance Industries, Infosys, and ICICI Bank were major contributors to Nifty’s rise.

Nifty Midcap 100 rose 0.7%

Nifty Smallcap 250 gained 0.8%

Global Context

While Indian equities surged, Asian markets faltered, with Japan’s Nikkei, China’s CSI 300, Hong Kong’s Hang Seng, and South Korea’s Kospi all posting losses around 1%.

Meanwhile, global investors remain cautious despite recent improvements in US-China trade relations and scaled-back policy changes in the US pharmaceutical sector, which benefited Indian stocks in metals, IT, and pharma.

What’s Next?

Experts caution that the market’s long-term momentum depends on corporate earnings.

“Sustained growth will be driven by earnings performance,” said Jitendra Sriram of Baroda BNP Paribas Mutual Fund.

Bernstein Research highlighted that investor concern still centers around earnings risks. Yet, recent results offer hope:

51% of NSE100 firms beat earnings estimates by over 4%—the best showing since June 2023.

Misses were at their lowest since September 2021.

Overall earnings growth slowed slightly to 10%, down from 11% in the previous quarter.

Despite high valuations, investors see long-term potential in sectors like defense, financials, and premium consumption.

“India stands out for its economic fundamentals—lower interest rates, falling oil prices, and resilient growth,” said Sunil Singhania of Abakkus Asset Manager.

Bottom Line

Thursday’s rally signals strong investor confidence in India's markets, driven by geopolitical relief, potential foreign inflows, and selective sector optimism. But sustaining this momentum will depend on earnings consistency and global macro stability.