The Indian equities market had a remarkable run this week, with the BSE Sensex soaring nearly 3,000 points and the NSE Nifty50 surging over 1,000 points in a relief rally after India and Pakistan announced a ceasefire last weekend. The ease in border tensions with Pakistan significantly boosted sentiment, while progress in trade negotiations of the US with China and India also injected positivity in the market. The market rally added ₹26.65 lakh crore to the investors’ kitty—the highest-ever weekly rise—as the total market capitalisation of the BSE-listed companies climbed to ₹443.66 lakh crore.
The biggest takeaways from this week’s rally were the robust performance of the broader markets—which showed strong resilience0—and the spurt in buying by both institutional and retail investors. The Nifty Midcap 100 and the Nifty Smallcap 100 indices jumped by up to 9%, driven by continued upward movement throughout the week.
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During the week ended May 16, the 30-share Sensex added 2,876 points, or 3.6%, to settle at 82,330. Similarly, the Nifty50 gained 1,012 points, or 4.2%, to end at 25,020, logging its highest weekly close since October 4, 2024. Outperforming the benchmark indices, the Nifty Midcap 100 and the Nifty Smallcap 100 indices surged 7.2% and 9.1%, respectively, during the week.
Among sectors, all the major indices closed in the green zone, while Defence, Realty, and Capital Market outperformed. While Defence zoomed 17%, Capital Market added 11.50%, and the Realty index climbed 10.85%. Notably, the defence sector continued its gaining streak for a sixth consecutive session as investors rushed to buy stocks in the backdrop of recent geopolitical tensions and the government’s pitch for the use of ‘Made in India’ defence equipment in modern warfare.
The benchmark indices started the week on a solid note, registering their highest-ever single-day gain in absolute term, with the Sensex adding 2,975 points and the Nifty soaring 917 points. The record rally was driven by a slew of positive developments, including a ceasefire between India and Pakistan, sustained foreign fund inflows, and a US trade deal with China.
In the next two days, the market saw some consolidation as investors booked some profit at higher levels, while it regained momentum on May 15, when the Sensex and the Nifty added 1.5% each after US President Donald Trump said that America and India are in talks to negotiate a trade deal. On Friday (May 16), the benchmarks ended marginally lower in the absence of any fresh triggers.
Rally driven by renewed investor confidence
The week proved to be spectacular, with the major indices posting their strongest single-day gains in over four years. Key sectors such as defence, NBFCs, and automobiles significantly outperformed the broader market, driven by renewed investor confidence in an improving business outlook, said Vinod Nair, Head of Research, Geojit Investments.
“Adding to the bullish sentiment, markets are also factoring in the potential resolution of other major geopolitical conflicts and easing trade disruptions, which could further support global equity markets. Both FIIs and DIIs have been consistently buying into the market, reinforcing the upward trajectory. Global investors displayed a heightened risk appetite, shifting capital away from traditional safe-haven assets such as gold and US Treasuries, reflecting a renewed sense of market confidence,” he said.
On the macroeconomic front, India received a boost from favourable inflation data, which marked the lowest reading in six years. Expectations of a normal monsoon season, which bodes well for agricultural output, along with declining crude oil prices, are expected to continue exerting downward pressure on inflation. A softer inflation outlook provides the Reserve Bank of India with room to maintain its accommodative monetary policy stance, including potential interest rate cuts to further stimulate economic growth.
“Looking ahead, investors will closely monitor upcoming Indian PMI data and US jobless claims to assess the momentum of economic recovery both domestically and globally,” Nair said.
The short-term technical outlook for the Nifty remains bullish, as it continues to trade above its key short-term moving averages. “The next resistance level for the Nifty is seen at 25,207, derived from the 76.4% Fibonacci retracement of the previous major decline. On the downside, the 24,800 level could offer immediate support,” said Nandish Shah, Senior Derivative & Technical Research Analyst, HDFC Securities.
Echoing this, Amol Athawale, Vice President-Technical Research, Kotak Securities, projected that the market texture is bullish in the short-term, but “buying on dips and selling on rallies” would be the ideal strategy for traders.
“On the downside, 24,665/81,300 and 24,400/80500 or the 20-day SMA (Simple Moving Average) would act as key support levels for the Nifty and Sensex, while 25,100/82,700 could serve as an immediate resistance zone for the bulls. A successful breakout above these levels could push the market towards 25,500/83,800. However, if the index falls below 24,400/80,500, the uptrend could become vulnerable,” he said.
For Bank Nifty, the higher bottom support is placed near 54,400. “As long as it is trading above this level, the positive momentum is likely to continue. On the higher side, it could retest the level of 56,000. Further upside may also continue, potentially lifting the index to 56,500,” said Athawale.
