Stock markets rally amid India-Pakistan truce

Indian capital markets logged their best single-day gains in over four years on May 12, driven by the announcement of a ceasefire agreement between India and Pakistan and favourable global cues. The easing of trade tensions between the US and China, following fresh tariff decisions, lifted investor sentiment across the board.

The United States and China jointly declared a 90-day pause on a portion of their existing tariffs, as outlined in a statement released by both countries. The ceasefire between India and Pakistan has paved the way for a sharp rally of nearly 4 per cent in India’s benchmark indices, Nifty50 and the Sensex, which closed at 24,924.70 and 82,429.90, respectively.

The prime mover of the rally will be the foreign institutional investors (FII) who have been buying Indian equities for sixteen continuous days, except on May 09, when the India-Pakistan tensions escalated. All sectoral indices ended in the green.

While India’s volatility gauge plunged during Monday’s intraday session. India VIX measures the market's expectation of future volatility based on the Nifty50 index options contracts. India VIX fell as much as 20.46 per cent to 17.79, the lowest level since the end of April, according to Bloomberg data.

Shares of information technology (IT) companies were in focus as the Nifty IT index registered a surge of 6.7 per cent, thus recording its sharpest intraday rally in over five years.

The sharp up move in IT stocks was triggered after the US decided to reduce tariffs on China to 30 per cent from 145 per cent for 90 days. Earlier, on April 7, 2020, the Nifty IT index soared 8.3 per cent in intraday trade.

In the past one month, the Nifty IT index outperformed the market by surging 15 per cent, as compared to a 6.7 per cent rise in the Nifty 50. However, thus far in the current calendar year 2025, the IT index has slipped 12 per cent due to concerns over the recession in the US and the tariff war.

Among sectoral indices, the Nifty Realty (up 5.93 per cent), followed by Metal (up 5.86 per cent) and IT indices, were the top gainers, while only the Pharma index (down 0.07 per cent) was trading in the red.

Pakistan’s stock market

The Karachi Stock Exchange 100 (KSE 100), the benchmark index of the Pakistan stock market, surged over 9 per cent on May 12, sparking a one-hour trading halt.

Pakistan's stock exchange halted trading on Monday for an hour, according to an exchange notification, a Reuters report stated.

According to data available on Bloomberg, the KSE 100 index jumped 9,751 points to 117,230. This comes after strong gains of nearly 4 per cent were seen in the May 09 trading session. With today's gains, the Pakistan benchmark index has again turned positive on a year-to-date basis.