October 23, 2025 : Indian equity markets kicked off strongly this week, with the BSE Sensex rising more than 700 points and the Nifty 50 reclaiming the 26,000 mark. In early trade, the Sensex climbed to around 85,160, while the Nifty hovered above 26,066.
Despite weak Asian peers and a subdued global backdrop, domestic markets are upbeat — here are five key reasons behind the rally.
- India-US Trade Deal Optimism
Reports suggest that India and the United States are nearing an agreement aimed at reducing tariffs, possibly bringing duties down from as high as 50 % to around 15-16 %. Such a deal would bolster Indian exports and improve investor sentiment.
Textile stocks, notably, surged over 10% as the market reacted to potential gains from easier access to the US market. - Renewed Foreign Institutional Investor (FII) Buying
Foreign funds are returning to Indian equities after a period of net outflows. The fresh capital inflows are adding fuel to the rally.
Also, short-covering (where sellers buy back shares to close positions) is helping accelerate gains — especially in large-cap stocks. - Strong Q2 Earnings and Festive Demand Expectations
Corporate results from banks and heavyweight companies have been stable, helping build confidence. For example, Q2 performance in sectors like private banks and IT has exceeded modest expectations.
Additionally, the upcoming festival season is anticipated to boost consumption, which bodes well for consumer-facing industries - Sectoral Leadership — IT, Banking & Consumption
The rally is broad-based, but stocks in IT (e.g., Infosys, HCL Tech) and banking are leading the charge. These sectors are benefitting from both domestic momentum and export/trade deal expectations.
FMCG and auto stocks are also participating, indicating durable strength beyond just a narrow stock list. - Technical Breakout & Positive Sentiment Bias
From a technical perspective, the Nifty clearing the 26,000 mark and the Sensex pursuing 52-week highs is reinforcing bullish sentiment. Markets tend to attract momentum flows when key levels are broken convincingly.
The overall mood on Dalal Street appears upbeat, boosting retail participation and media coverage of the rally.
Things to watch (Risks & caveats):
- The market is riding high on expectations; any delay or disappointment in the trade deal could trigger a pull-back.
- Valuations are elevated; investors should keep an eye on underlying earnings growth rather than just momentum.
- Global risk factors (e.g., US inflation data, crude oil volatility, currency movements) could alter the cue quickly.
- While large-caps are doing well, mid/small-cap segments might lag or see sharper corrections if sentiment weakens.
Summary
Indian markets surged with Sensex up 700+ points and Nifty above 26,000, driven by India-US trade optimism, strong earnings, FII inflows, sectoral strength and technical breakout momentum.