Indian stocks rally amid trade tensions

India's stock market has shown resilience in recent weeks, recovering from a downturn exacerbated by escalating trade tensions between the United States and China. Since hitting a low on April 7, 2025, Indian stocks have soared approximately 10%. The recovery has been largely driven by robust domestic investment, compensating for significant foreign fund outflows earlier this year. Analysts at ICICI Securities highlight that domestic institutional investors are focusing on sectors like financials, industrials, and consumption, while stocks linked to global demand are witnessing a sell-off. JPMorgan's analysts have mirrored this optimism, suggesting that India's market fundamentals are strengthening. Recent data confirms that earnings expectations for 2025 have been adjusted downwards by analysts, setting the stage for potential positive surprises as companies report their earnings. Bernstein's equity strategist, Venugopal Garre, notes that India's market remains relatively insulated from the ongoing trade war and stands to benefit in the longer run if a trade agreement is reached. However, there are concerns regarding sectors dependent on global markets, notably information technology, which may face direct impacts from deteriorating trade relations. India's Finance Minister Nirmala Sitharaman has remained hopeful about finalizing a bilateral trade agreement with the United States by this fall and is also working to reduce the fiscal deficit under 4.5% of GDP by 2026. Despite the challenges, the Nifty 50 index's recent performance—closing above 24,000 points—demonstrates renewed confidence among investors. Market figures illustrate that despite external pressures, India's economic fundamentals seem to be improving, allowing for a diversified approach to investment. This optimistic sentiment favors the country's banking sector, as growth appears to be solidifying. Many investors view the current changes in the market as an opportunity to capitalize on India's prospects amid broader uncertainties in the global economy.