Eventful Month for stock market: War Scares, Tariff Talks & a Rapid Market Rebound
Snapshot of current month progress
The Indian stock market has shown significant resilience last month and current month despite uncertainty and important news flow. After forming recent low on 7th apr’25, nifty rallied 3.4% in Apr month and 2.8% so far in current May month. The rally was broad based and many factors contributed to this rally.
This month, India and Pakistan have experienced one of their most intense periods of conflict in recent years, marked by military engagements, diplomatic strains, and emerging calls for peace. The current tensions were ignited by a terrorist attack on April 22 in Pahalgam, Jammu & Kashmir, which resulted in the deaths of 26 civilians, including tourists. In response, India suspended the 1960 Indus Waters Treaty and closed the Attari-Wagah border crossing. India launched “Operation Sindoor” on May 6th night and (early morning May 7th), targeting alleged terrorist infrastructure in Pakistan and Pakistan-administered Kashmir. These strikes, the deepest since 1971, focused on specific terrorist locations like Muridke and Bahawalpur. In retaliation, Pakistan conducted missile attacks on Indian military installations which India responded appropriately and successfully. Amid escalating hostilities, a ceasefire was reached on May 10, details of which have been shared in press conference conducted by Indian Armed forces. Indian Government have acknowledged the cessation of military actions, stating that key objectives, including dismantling terrorist infrastructure, had been achieved and are ready to respond swiftly if any further retaliation occur. While the ceasefire has momentarily halted direct military engagements, the situation continues to be volatile, with both nations’ actions and diplomatic engagements being closely watched by the international community.
The above ceasefire triggered a big rally in the stock market on 12th may of more than 900 points in nifty i.e 3.8%, one of the single biggest single day gains in recent times. Other factors contributing to the rally is FII and DII aggressive buying to the tune of Rs 47000 crores this month so far. Corporate result for the current quarter is on expected line and projected to show PAT growth of 4% to 6% for Nifty. RBI rate cut last month, its indication that inflation is likely to remain stable and below 4% in medium term with possibility of further rate cuts is also positive for the market. Revival in rural demand with normal monsoon forecast is also favourable.
Globally all markets including US markets have also seen rally this month driven by tariff news. US has implemented a 90-day pause on increased tariffs for most countries, aiming to de-escalate global trade tensions and foster negotiations. On May 12, 2025, the United States and China agreed to a 90-day reduction in tariffs, aiming to de-escalate their prolonged trade conflict. The U.S. reduced tariffs on Chinese goods from 145% to 30%, while China lowered its tariffs on U.S. imports from 125% to 10%. This agreement was reached during trade talks in Geneva and is intended to provide a window for further negotiations. All this factors contributed to rally across all markets. Further developments on this will impact stock markets, hence to be closely tracked.
Sectoral performance
The markets witnessed broad based recovery across sectors and market cap since few months. Some sectors performed relatively better than others. The sectors which delivered best returns (greater than 3%) this month are Defence, IT, Media, Auto and metals and sectors which were laggard are Pharma, Realty and Banking. Midcap and small cap have also seen good rally and have outperformed Largecap. Same trend is to continue for the rest of this month.
Global Market outlook including commodity
The global economy is facing a slowdown with lingering inflation & uncertain policy environments. There has been a favourable development on US tariff as explained above but to see how it unfolds in coming weeks after pause is lifted. There are increasing geo political events and risks, latest includes India and Pakistan conflict and all this will have impact on volatility and the markets. Gold & Silver has remained the most preferred asset class recently with stellar rally and as mentioned in earlier articles it is likely to consolidate and see some corrections around this peak valuation. There have been minor corrections in both Gold and Silver, however adding them and prudent rebalancing in the portfolio diversify risk and offer stability. Gold is currently trading at Rs 93k/ 10 gm and Silver at Rs 95k/ 1kg
Outlook for the Indian Market
Investment behaviour and discipline plays a key role for success in investing journey. The last year and current year have amplified this remarkably. Equities as an asset class are volatile, rallies and corrections are inevitable but it deliver good returns comparatively over long term. Patience and disciplined investing has rewarded Investors recently with sharp rally of 15% in nifty in a month time. The investment strategies, lessons and guidelines have been discussed in detail in previous articles which can be followed in any market conditions. The outlook remains positive for this month and financial year as well despite many uncertainties. Increasing interdependence of global markets and geo political risks remain major headwind to track. Stay alert and stick to the Investment principles. Further, consult your investment advisor for prudent financial practices.
Fundamental outlook: Indian market witnessed sharp recovery and Nifty is just 5% away from all time high of 26277. However some sectors have to do catch up with this recovery yet. Nifty is reasonably valued at current levels based on the earnings growth and other factors. There is consolidation and volatility expected around this level. Geo political events and corporate earnings will further have impact on the market.
Technical outlook: Indian market is in uptrend based on technical parameters. Nifty is trading above all key moving averages. The rally was equally fast and swift as the corrections earlier. Nifty is trading at monthly RSI of 64 and weekly RSI of 60 which indicates strong uptrend. Nifty immediate support seen at 24300, major support at 23800, immediate resistance seen at 25200 and major resistance at 25500.
