Indian equities are experiencing a significant V-shaped recovery, with the BSE 500 index surging 12.1 per cent this month, mirroring Covid-era comebacks despite persistent geopolitical uncertainties and potential earnings risks.
Key Points
- Indian equities are staging their sharpest rebound in years, with the BSE 500 index rallying 12.1 per cent so far this month.
- This rebound follows a sharp 11 per cent decline in March, indicating a V-shaped recovery pattern similar to those seen during the Covid pandemic and the Russia-Ukraine war.
- Despite the less supportive global backdrop compared to the post-pandemic rally, investors are treating sharp corrections as buying opportunities.
- Abundant domestic liquidity has broadened the recovery beyond large-cap stocks, with advancing stocks outnumbering decliners by nearly two to one.
- Analysts caution that sustaining the uptrend depends on the trajectory of geopolitical risks and their impact on growth and corporate profitability.
After the steepest selloff since the Covid pandemic, Indian equities are staging their sharpest rebound in years, despite persistent uncertainty over the economic and earnings fallout from the West Asia conflict.
The broader-market BSE 500 index has rallied 12.1 per cent so far this month.
If sustained, that would mark its strongest monthly advance since April 2020, when it surged nearly 15 per cent after plunging 24 per cent in March at the height of the Covid-triggered shock.
Gains extended on Tuesday, with the benchmark Sensex and Nifty 50 posting their highest closing levels in six weeks.
The Sensex rose 753 points, or 0.96 per cent, to 79,273, while the Nifty 50 added 212 points, or 0.9 per cent, to 24,577 — both their strongest finishes since March 6.
Market Dynamics and Recovery Patterns
The current rebound follows a similarly sharp correction. Markets fell more than 11 per cent in March, their worst monthly decline since March 2020.
The swift slide and recovery point to a V-shaped pattern, echoing the pandemic-era rebound and the rally that followed the 2022 selloff triggered by the Russia-Ukraine war.
Such trading patterns, experts say, suggest investors are treating sharp corrections as buying opportunities rather than signals of a prolonged downturn.
This time, however, the backdrop is less supportive.
The post-pandemic rally was fuelled by unprecedented global stimulus.
Now, equities have recouped post-war losses even as analysts pare earnings growth estimates for FY27.
Global and Domestic Influences
Some market participants attribute the global rebound to expectations that windfall revenues accruing to oil-exporting nations will find their way into financial assets, including equities.
Domestically, abundant liquidity has broadened the recovery beyond large caps.
Advancing stocks have outnumbered decliners by nearly two to one this month, the strongest advance-decline ratio for the BSE since data became available in 2009.
Outlook and Expert Caution
Analysts, however, caution that sustaining the uptrend will depend on the trajectory of geopolitical risks and their spillover into growth and corporate profitability.
"The BSE Small and Midcap 400 index has rebounded sharply in April to pre-war levels despite concerns around supply disruptions," said Nuvama.
"While the conflict may cause near-term earnings disruptions, dovish central banks and sustained domestic institutional flows remain supportive."
The brokerage added that a sharp earnings rebound, like those seen during the Covid pandemic in 2020 or the Russia-Ukraine war in 2022, appears unlikely without large-scale stimulus or a release of pent-up demand.
