From 13% Down To Near Flat: How Nifty And Sensex Recovered From War-Time Losses

Indian equity markets have staged a sharp recovery from their wartime lows, with the Sensex and Nifty 50 recouping most of the losses triggered by the US-Iran conflict.

The country's benchmark indices, the NSE Nifty 50 and the BSE Sensex, which had declined around 13% each since the war began in late February, have recovered most of their losses and are currently trading just 0.9% and 0.5% below their respective levels at the start of the US-Iran war.

The rebound, analysts believe, has come amid easing crude oil prices, hopes of de-escalation in West Asia, improving corporate earnings and a return of foreign portfolio investors (FPIs) to Indian equities.

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The benchmarks, however, are still trading below their record highs. The 30-stock Sensex is currently around 4.5% below its record high of 86,159.02, clocked on Dec. 1, 2025, while the 50-stock Nifty is down around 4% from its record high of 26,358.25, recorded on Jan. 5, 2026.

Yet, Indian stocks continue to trade at a premium to most of their global peers. The Nifty is currently trading at a price-to-earnings (P/E) ratio of 22.15 times. Meanwhile, its Asian counterparts, the Hang Seng, Shanghai's CSI 300 and South Korea's Kospi, are trading at 11.59 times, 15.45 times and 8.55 times, respectively. In the US, the Dow Jones and S&P 500 are trading at P/E multiples of 19.96 times and 22.94 times, respectively.

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At 11:55 am, the BSE Sensex index was trading at 82,363.60, up 1.55%. On the other hand, Nifty 50 was trading at 25,385.10, up 1.36%

What Triggered The Recovery In Indian Markets?

Ambareesh Baliga, an independent analyst, said the recovery in Indian markets gathered pace after the US midterm elections, following a period of selling driven by the conflict in West Asia.

The conflict had pushed up crude oil prices, fuelling inflation concerns across the world. It also put pressure on the Indian rupee, while foreign institutional investors (FIIs) continued to sell Indian equities.

"If you look closely, the rebound in Indian markets largely began after the US midterm elections," Baliga said.

He added that easing tensions in West Asia and hopes of diplomatic talks have brought crude oil prices down, while the rupee has also appreciated recently. These developments, along with decent corporate earnings and easing concerns around an AI bubble, have improved sentiment towards Indian equities.

"With these factors coming together, it is only natural for FIIs to return to Indian markets," he said.

Baliga also pointed to India's economic growth prospects and the breadth of its equity market as factors that could attract foreign investors.

India is likely to continue growing at around 7-7.5%, he said, adding that unlike markets such as South Korea, which have a larger concentration in technology and AI-related stocks, India offers investment opportunities across a wider range of sectors.

He said the depth of the Indian market is important for foreign investors, who look for markets with enough opportunities across sectors. India's market breadth and growth potential remain key attractions.

Earnings Recovery, Improving Macro Data Support Markets

Kranthi Bathini, director of equity strategy at WealthMills Securities, said the return of foreign investors has coincided with easing crude oil prices and a better-than-expected Q2 earnings season.

Companies had entered the September quarter with modest expectations, but several large-cap companies reported an improvement in earnings. Reliance Industries, Larsen & Toubro and HCLTech were among the companies showing a recovery, while the banking sector also remained resilient.

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"Stock prices ultimately follow earnings, and the improvement in corporate performance is supporting the market recovery," Bathini said.

He also pointed to improving macroeconomic indicators, including auto sales and GST collections, as factors supporting the market.

The combination of better-than-expected earnings, improving economic data, lower crude oil prices and returning FII flows is now getting reflected in Indian equity markets, he said.

Can The Market Recovery Sustain?

Ravi Singh, chief research officer at Master Capital Services, said the recovery in the Sensex and Nifty has been supported by easing geopolitical tensions, lower crude oil prices, improving global sentiment and renewed buying after a period of weakness.

Expectations of progress towards ending the Iran conflict have also supported investor confidence, he said.

However, Singh said sustaining the gains would depend on corporate earnings growth, continued FII inflows and global developments. Any fresh escalation in geopolitical tensions or a rise in crude oil prices could trigger volatility and limit further upside.

He added that markets would need more than a few sessions of sharp gains to establish a sustained recovery. Consistent FII inflows, improving market breadth, participation from midcap and smallcap stocks and a recovery in corporate earnings would provide stronger evidence of improving investor confidence.

"If the rally is driven mainly by short covering and sentiment without earnings improvement or fresh institutional buying, it could prove to be a temporary rebound," Singh said.

What Should Investors Watch Next?

Singh said global factors, particularly crude oil prices, geopolitical developments and US interest rate expectations, will remain important for Indian equities.

He also said that while markets have historically tended to perform positively around Diwali, festive sentiment should not be treated as a reliable indicator of future returns.

Market performance ultimately depends on prevailing economic conditions, corporate earnings, global cues and liquidity, he said. Investors should therefore look for sustained buying and improving fundamentals rather than base investment decisions solely on seasonal trends.

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