India’s stock market benchmarks, the Sensex and Nifty 50, experienced significant gains on March 18, with the Sensex rising over 800 points and the Nifty 50 surpassing 22,750, despite global geopolitical tensions and US tariff policies.

Despite global turmoil stemming from US President Donald Trump’s aggressive tariff policies and a fresh escalation in geopolitical tensions, India’s stock market benchmarks—the Sensex and the Nifty 50—rallied with solid gains in morning trade on Tuesday, March 18.

The Sensex jumped over 800 points, while the Nifty 50 reclaimed 22,750 amid an across-the-board buying. The BSE Midcap and Smallcap indices jumped up to 2 per cent.

Around 10:15 AM, the Sensex was 806 points, or 1.09 per cent, up at 74,976, while the Nifty 50 was 232 points, or 1.03 per cent, up at 22,740.

The overall market capitalisation of BSE-listed firms rose to over ₹397 lakh crore from ₹393 lakh crore in the previous session, making investors richer by about ₹4 lakh crore in a single session.

While the world grapples with economic uncertainty stemming from the trade war, simmering tensions in the Middle East have created new challenges for global stock markets.

According to reports, US President Donald Trump on Monday said that he would hold Iran directly accountable for any future attacks by Yemen’s Tehran-backed Houthi rebels, who have previously targeted the US and other foreign vessels in the Red Sea.

Why is the Indian stock market rising?

Experts pointed out the following five factors that could be driving the Indian stock market higher:

1. Valuation comfort after the recent correction

The domestic market is witnessing buying due to valuation comfort, especially in large caps after the recent correction.

The current PE (price-to-earnings ratio) of Nifty 50, at 20, is near its three-month low.

“Looking at equity valuations, we have seen some relief due to the significant decline in expensive stocks,” said Shrikant Chouhan, the head of equity research at Kotak Securities.

The attractive valuations of several stocks appear to have drawn investors to accumulate them at this stage.

2. Improving macro picture

Macroeconomic indicators have started showing green signals about the Indian economy.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, highlighted positive domestic cues, including a rebound in FY25 Q3 GDP growth to 6.2 per cent, a surge in the IIP by 5.1 per cent, a 16 per cent increase in gross tax collection, a declining trade deficit, and, most importantly, a drop in CPI inflation to 3.6 per cent. He noted that these favourable macroeconomic trends bode well for the market.

The improving macroeconomic picture of the country has raised hopes for an earnings revival from the next quarter, which is influencing market sentiment. 

3. Market discounting a milder impact of Trump tariffs

Trump’s tariffs are certainly a concern, but Indian investors appear to be factoring in the likelihood of a milder impact.

“The US cannot antagonise both China and India at the same time due to strategic reasons. Trade wars cannot continue for a long. It may continue for another quarter or so, but the domestic equity market has already discounted largely by already declining a lot. Moreover, India is not a major contributor to the US trade deficit in goods account. India is addressing some of the concerns of the US,” said G Chokkalingam, Founder & Head of Research at Equinomics Research Private Limited.

“The US cannot prolong the trade war for much longer as it would substantially weaken its economy and markets. Therefore, we see the possibility of the intensity of trade wars tapering off within a quarter or so,” said Chokkalingam.

4. Rupee’s rise, decline in the dollar index

The Indian rupee is hovering near its three-week high. In early trade on Tuesday, the local currency rose 10 paise to 86.71 against the US dollar. Meanwhile, the US dollar index, which gauges the greenback’s strength against a basket of six currencies, is trading near 103.50. Year-to-date, the dollar index has declined 4.5 per cent.

A strengthening rupee and a weaker dollar index are positive for the Indian stock market, as they can help curb foreign capital outflows, if not trigger fresh buying. Additionally, they ease inflationary pressures and lower import costs.

5. Expectations of RBI rate cut

With inflation falling below the Reserve Bank of India’s 4 per cent target level, hopes are high that the central bank may shift focus to supporting growth and cut benchmark policy rates significantly in the current cycle.

According to State Bank of India (SBI) Research Ecowrap, the Reserve Bank of India (RBI) will likely slash the benchmark repo rate by a total of 75 basis points (bps) in 2025, with upcoming 25 bps reductions each in April, June, and October policy meetings.

The RBI’s Monetary Policy Committee (MPC) will meet from April 7 to 9 to decide on policy rates and its stance.