PTC Web Desk: The Indian stock market witnessed an impressive four-day rally, reversing most of its earlier losses caused by US tariffs, following President Donald Trump's announcement of a 90-day tariff pause. This move sparked optimism in global markets, especially in India, where the Nifty 50 index surged by 1,450 points, climbing from 22,399 to 23,851. On Thursday, the index closed 414 points or 1.77% higher, posting a weekly gain of 4.48%—its best performance since February 5, 2021.

Meanwhile, the BSE Sensex also saw a significant jump, climbing from 73,847 to 78,553, notching a gain of nearly 1,700 points over the four trading sessions.

According to Bajaj Broking, “Benchmark indices rallied strongly last week, driven by favourable global cues and steady foreign fund inflows. Banking stocks outperformed, bolstered by easing inflation (CPI) data and a normal monsoon forecast, which heightened expectations of a deeper interest rate cut cycle by the RBI. Trump’s announcement of tariff exemptions for smartphones and computers, along with the possibility of pausing auto tariffs, further boosted investor sentiment.”

Why Indian stock market rallied for four days?

Market experts attribute the sustained rally not only to the 90-day tariff pause by Trump but also to several post-announcement developments. These include the potential for an India-US trade deal, buzz around an India-China trade agreement, reversal in Foreign Institutional Investors (FIIs) investment trends, anticipated economic reforms under Modi 3.0, weakness in the US dollar, sell-off in US bonds and equities, and favorable monsoon forecasts.

Reasons behind market rally

The initial trigger came from Trump’s tariff pause. However, the rally gained momentum after reports surfaced about Indian officials visiting the US to initiate trade negotiations. Additionally, the upcoming visit of the US Vice President to India has further boosted hopes for a formal India-US trade agreement, especially as the US seeks partnerships with friendly nations amidst a trade war with China.

India is reportedly exploring trade talks with China to enhance its limited role in global trade routes. As the US-China trade war intensifies, China, like the US, is also looking to mitigate economic losses through new partnerships. This creates urgency for potential India-China trade collaborations, adding to the market's positive momentum.

Experts believe that the Indian government, traditionally protectionist, may now be considering opening up its markets. With consultations ongoing with business leaders, there’s speculation about a new wave of economic reforms under the Modi 3.0 administration, which has significantly lifted investor confidence.

Foreign Institutional Investors have emerged as net buyers throughout last week. With a weak US dollar, a sell-off in American bonds and equities, and rising trade tensions, FIIs are turning to Indian assets. Last week alone, FIIs bought Indian stocks worth Rs 14,670 crore in the cash segment, reinforcing speculation of a trend reversal in foreign investments.

The India Meteorological Department (IMD) has predicted an above-normal monsoon, which is expected to drive rural income, control inflation, and support GDP growth. This positive monsoon outlook has further fueled the stock market rally, as better economic indicators are anticipated in the coming quarters.