Indian markets rally, erasing trade war losses as investors bet on resilience

Indian equities surged on Tuesday as markets reopened after an extended weekend, with the NSE Nifty 50 Index jumping as much as 2.4% in Mumbai — surpassing its April 2 closing level. According to Bloomberg, this sharp rebound makes India the first major market globally to recover losses tied to the recent round of reciprocal tariffs imposed by US President Donald Trump earlier this month.

India Outpaces Asia Amid Tariff Turmoil

While a broader index of Asian stocks remains over 3% lower since the tariff announcements, India’s swift recovery has reinforced its growing reputation as a relative safe haven amid global market volatility.

Strong Domestic Fundamentals Support Market Recovery

Investors continue to see India’s large, domestic-led economy as better insulated from a potential global slowdown than export-heavy peers more exposed to US tariffs. With the US-China trade war escalating, India’s conciliatory approach and ongoing trade talks with Washington have strengthened its position as a potential alternative hub for global manufacturing.

“We remain overweight India in our portfolios,” said Gary Dugan, CEO of The Global CIO Office. “Strong domestic growth and the likely diversification of supply chains away from China make Indian equities a safer medium-term bet,” he told Bloomberg.

Investor Sentiment Improves Despite Earlier Setbacks

The rally follows a tough period for Indian equities, with the Nifty 50 falling nearly 10% over the past two quarters, pressured by slowing growth, high valuations, and sustained foreign investor outflows. Overseas investors have sold more than $16 billion in Indian equities so far this year, approaching the $17 billion record set in 2022.

However, sentiment has begun to improve, supported by moderating stock valuations, expectations of aggressive rate cuts from the Reserve Bank of India, and easing crude oil prices — a significant relief for India’s import-heavy economy.

India's Resilience Shines Through

Bloomberg data shows the Nifty 50 currently trades at 18.5 times projected 12-month earnings, below its five-year average of 19.5 and its September peak of 21.

“India isn’t immune to global risks but is relatively better placed amid trade war concerns due to its low direct revenue exposure to the US, especially on goods,” said Rajat Agarwal, strategist at Societe Generale SA. “Equities should also benefit further if oil prices stay low.”

India accounted for just 2.7% of total US imports last year, a fraction of China’s 14% and Mexico’s 15%, according to Bloomberg, further supporting its resilience in the current global trade environment.