Indian Stock Market Rallies on US-China Trade Deal Optimism and Rate Cut Hopes

Indian equity markets resumed their winning momentum on Monday, October 27, 2025, after a brief pause in the previous session. The BSE Sensex surged 566.96 points (0.67 percent) to close at 84,778.84, while the NSE Nifty 50 climbed 170.9 points (0.66 percent) to settle at 25,966.05. The rally was driven by a powerful combination of global factors—including breakthrough progress in US-China trade negotiations, expectations of additional Federal Reserve rate cuts, and a landmark artificial intelligence partnership between Indian conglomerate Reliance Industries and tech giant Meta Platforms.

The broad-based rally saw participation across market segments, with the BSE Midcap index adding 0.7 percent and the Smallcap index rising 0.5 percent. Among sectoral indices, Nifty PSU Bank stole the spotlight, surging 2.76 percent to register a fresh all-time high, while Metal, Oil & Gas, and Realty indices gained between 1 to 2 percent. Only the Media and Pharma sectors witnessed mild profit booking.

Key Catalysts Behind the Market Surge

US-China Trade Deal Framework

The most significant trigger for Monday’s rally came from across the Pacific. US Treasury Secretary Scott Bessent announced that top officials from both nations had reached a framework agreement for a potential trade deal, which Presidents Donald Trump and Xi Jinping are expected to review later this week during meetings in South Korea. The preliminary framework averted a threatened 157 percent tariff on Chinese goods—a move that would have been potentially ruinous for global trade.

Bessent indicated in media interviews that the previously threatened 100 percent tariffs on Chinese goods were “effectively off the table,” while China agreed to increase soybean imports and delay restrictions on rare earth exports. This development provided immediate relief to markets worldwide, including India, which stands to benefit from reduced global trade tensions and stable commodity flows.

The easing of US-China tensions is particularly important for India’s export-oriented sectors and companies with global supply chain exposure. Metals, commodities, and technology sectors—all sensitive to trade friction—responded positively to the news. The Indian rupee, however, weakened by 39 paise to close at 88.24 per dollar, as global demand for the US dollar remained elevated pending final trade deal confirmation.

Federal Reserve Rate Cut Expectations

Complementing the trade deal optimism was softer-than-expected US inflation data for September, which reinforced market conviction that the Federal Reserve would implement additional interest rate cuts. US consumer prices rose less than analysts had anticipated, boosting expectations for two more rate reductions in 2025—one at the upcoming policy meeting this week and another in December.

Vinod Nair, Head of Research at Geojit Investments, explained the significance: “The domestic market witnessed a broad-based recovery owing to progress in the US-China trade talks. Meanwhile, gold prices declined as demand for safe-haven assets waned. Softer-than-expected US CPI data renewed expectations of a Fed rate cut this week, boosting investor confidence.”

Lower interest rates in the United States typically make emerging markets like India more attractive to foreign investors seeking better returns. While Foreign Portfolio Investors (FPIs) were marginally net sellers on October 27—offloading shares worth ₹241.75 crore—Domestic Institutional Investors (DIIs) stepped in aggressively, pumping in ₹2,422.67 crore and providing crucial support to the market.

Reliance Industries and Meta’s AI Partnership Takes Center Stage

Among individual stocks, Reliance Industries emerged as one of the day’s top performers, gaining over 2 percent after announcing the incorporation of Reliance Enterprise Intelligence Ltd (REIL), a joint venture with Meta Platforms focused on enterprise artificial intelligence solutions.

Under the amended joint venture agreement, Reliance Intelligence (a wholly-owned subsidiary of Reliance Industries) will hold a 70 percent stake in REIL, while Facebook Overseas (a Meta subsidiary) will own the remaining 30 percent. Both partners have jointly committed an initial investment of approximately ₹855 crore (around $100 million). REIL, incorporated in India on October 24, 2025, will focus on developing, marketing, and distributing enterprise AI services.

This partnership marks a strategic pivot for Reliance Industries, which has been aggressively expanding into the technology and artificial intelligence space. Morgan Stanley analysts estimate that Reliance may spend $12-15 billion over the next few years on AI infrastructure, potentially including a giant 1-gigawatt data center. The brokerage firm believes the AI venture could be valued at a minimum of 2 times price-to-book, potentially reaching $30 billion—double the capital deployed.

”We estimate an ROCE of approximately 11 percent on these initial investments, based on recent token prices from LLM providers,” said Mayank Maheshwari, analyst at Morgan Stanley. “The remaining capacity could be leased as ‘Datacenter as a Service’ to hyperscalers and large language model providers.”

Reliance Industries’ stock touched an intraday high of ₹1,463.5 before closing at ₹1,480.2, marking its second consecutive session of gains. The company’s market capitalization now stands at approximately ₹20 trillion, and its shares have risen 21 percent year-to-date, significantly outperforming the Nifty 50’s 6.8 percent advance.

Bharti Airtel Hits New Peak on Strong Fundamentals

Bharti Airtel was another standout performer, surging 2.65 percent to close at ₹2,081.05 and touching a new 52-week high of ₹2,093.85 during intraday trading. The telecom giant’s rally extended gains for the second consecutive session, with the stock rising 4 percent over the two-day period.

Multiple factors supported Bharti Airtel’s advance. The Supreme Court of India permitted the Central government to reconsider the telecom operator’s plea for quashing the Department of Telecommunications’ additional adjusted gross revenue (AGR) demands for the period up to 2016-17. “No reason why Centre should be prevented from reconsidering the issue,” the top court stated, providing regulatory relief to the company.

Additionally, investors are positioning ahead of Bharti Airtel’s second-quarter results scheduled for announcement on November 3, 2025. Analysts expect healthy earnings driven by tariff hikes implemented earlier in the year and continued subscriber growth. With a market capitalization of ₹11.88 lakh crore, Bharti Airtel remains India’s largest private sector telecom operator and a key constituent of major indices.

The stock has delivered impressive returns across timeframes: up 23.79 percent over the past year, 30.28 percent year-to-date, and a remarkable 539.77 percent over the past decade, significantly outperforming broader market indices.

PSU Banks Shine with Record-Breaking Performance

The banking sector witnessed strong momentum, particularly among public sector lenders. The Nifty PSU Bank index surged 2.76 percent to close at 7,990.65, marking a fresh all-time high. Intraday, the index touched 8,053.40, surpassing its previous peak.

Individual PSU bank stocks led the charge:

• State Bank of India (SBI) gained 2.48 percent, closing at ₹916.10
• Bank of Baroda rose 1.69 percent to ₹270.70
• Canara Bank advanced 2 percent to ₹128.22
• Punjab National Bank climbed 1.24 percent to ₹118.39

The PSU Bank rally was fueled by multiple factors: improving asset quality, expectations of credit growth recovery, and optimism about interest margin expansion in the second half of the fiscal year. The sector has delivered robust returns, with the Nifty PSU Bank index up 21.58 percent over the past year and an astounding 136.10 percent over three years.

Broader Market Breadth and Sectoral Performance

Market breadth remained largely positive despite some late-session profit booking. Out of 3,241 stocks traded on the NSE, 1,638 advanced while 1,507 declined, and 96 remained unchanged. A total of 89 stocks touched their 52-week highs, while 57 hit 52-week lows. Additionally, 85 stocks were locked in upper circuits, whereas 86 were in lower circuits.

Among sectoral indices, Nifty Metal gained 1.16 percent and Nifty Oil & Gas rose 1.52 percent, benefiting from the improved trade sentiment and stable commodity prices. The Nifty Realty index climbed 1.63 percent as expectations of continued rate cuts and festive season demand boosted sentiment in the real estate sector.

On the losing side, Kotak Mahindra Bank emerged as the largest decliner, dropping 1.74 percent to ₹2,148 despite reporting a mixed second-quarter performance. Bharat Electronics fell 1.62 percent to ₹415.20, and Infosys declined 1.35 percent to ₹1,504.80 as technology stocks witnessed profit booking.

What to Watch Next

As Indian markets continue their upward trajectory, several key events and developments will shape near-term direction:

• US Federal Reserve Policy Meeting (This Week): The Fed is widely expected to announce a 25 basis point rate cut. Market focus will shift to the policy statement and guidance on future rate trajectory. Any dovish signals could provide further momentum to emerging markets including India.

• US-China Summit in South Korea (October 31): President Trump and President Xi Jinping are scheduled to meet to potentially finalize the trade deal framework. Success or failure of this meeting will have significant implications for global trade, commodity prices, and risk sentiment.

• Quarterly Earnings Season: Indian companies are in the midst of announcing second-quarter results. Key results to watch include Bharti Airtel (November 3), multiple financial services companies, and large-cap IT firms. Earnings quality and forward guidance will be crucial for sustaining the current rally.

• Technical Levels for Nifty: Analysts identify crucial resistance at 26,000-26,100 levels. A decisive breakout above this zone could trigger a sharp rally towards 26,250-26,500 in the short term. On the downside, support is placed at 25,700-25,800 levels.

• Global Economic Data: Upcoming data on US GDP growth, European economic indicators, and Chinese manufacturing PMI will influence global risk appetite and capital flows to emerging markets.

• India VIX Movement: The India Volatility Index (VIX) rose 2.33 percent to close at 11.86 on Monday, indicating a marginal uptick in market nervousness. Traders will watch if VIX remains below the 15 threshold, which typically indicates a stable market environment.

• Foreign Investment Flows: After months of sustained selling, FPIs have shown signs of returning to Indian equities in October, particularly through primary market participation in IPOs. Sustained buying by FPIs would provide crucial support for the rally.

Technical and Analyst Perspectives

Market technicians remain constructive on the near-term outlook. Rupak De, Senior Technical Analyst at LKP Securities, noted: “The Nifty started on a strong note and remained mostly sideways throughout the day ahead of the NSE F&O expiry. Sentiment continues to remain strong as the index sustains above the breakout point. The current setup looks favorable for a further rally in the index, with dips likely to be bought into.”

Shrikant Chouhan, Head Equity Research at Kotak Securities, observed: “A bullish candle on daily charts and a reversal formation on intraday charts indicate a further uptrend from the current levels. For day traders, 25,900/84,500 would act as an immediate support zone. As long as the market trades above this level, the bullish sentiment is likely to continue.”

Sudeep Shah, Head of Technical Research at SBI Securities, highlighted the improving global backdrop: “Easing U.S.-China trade tensions and cooler-than-expected U.S. inflation data reinforced market expectations that the U.S. Federal Reserve could cut interest rates by another 50 basis points before year-end. The upbeat global cues provided a strong backdrop for domestic equities, helping markets extend their gains through the session.”

---

Disclaimer:

This article is only for information purposes and is not investment advice. Before investing, do your own research.