Indian markets witnessed a sharp gap-up on 8th April 2026, with a closing gain of 3.8% by Nifty50 and 4.2% by Microcap index. The move was driven by President Trump’s announcement of a two-week ceasefire. Iran also agreed to temporarily allow the passage of ships, resulting in a sharp fall in crude oil prices to below $100. However, the rally was short-lived.
The ceasefire only paused direct U.S.–Iran strikes while deeper geopolitical tensions remained unresolved. Although the ceasefire was technically extended the U.S. Navy continued its blockade and Israeli strikes on Lebanon kept the cycle of retaliation alive.
What’s driving the Indian stock market?
Overall, the domestic market has maintained a negative bias over the past two months, and this week, Thursday, it fully closed the gap created on 8 April. The weakness has largely been driven by FII selling in the main indices, while momentum in the broader market remained resilient. Micro, small, and mid-cap indices are up 15%, 12%, and 9%, respectively, on Thursday. Domestic inflows are recovering after the profit-booking phase of the 2026 first quarter.
Investors appear to believe that the energy shock will be temporary and unlikely to materially weaken domestic demand. If that assumption proves wrong, domestic investor sentiment could reverse sharply. With valuations becoming more reasonable and markets increasingly discounting potential FY27 challenges, the current setup appears progressively constructive.
Technically and structurally, the market appears to be in the later stages of building a firm base. This phase reflects a gradual transfer of equity ownership from weaker global hands to stronger domestic investors. If FII selling slows or there is greater clarity on U.S. FED policy, the large pool of domestic capital in the secondary market could trigger a broad-based breakout.
At the same time, global central banks are increasingly acknowledging that inflation may remain elevated for longer. Institutions such as the RBI and FED may need to consider rate hikes in the second half of the year, while the ECB has already initiated them with a 25bps hike this week.
The next major event for global markets is the US FED meeting on 16–17 June under its new leadership. While the new Chair was initially perceived as relatively supportive of policy easing, evolving macroeconomic conditions may necessitate a more cautious stance. The backdrop has shifted materially, with resilient labour data, CPI rising to 4.2%, and global bond yields remaining elevated.
Stock market outlook
The market’s immediate focus will be on how Warsh chooses to operate the FED. As his policy approach appears different from the traditional framework. Even without changing policy rates, investors will watch whether the FED accelerates balance-sheet reduction through quantitative tightening or revises its communication framework, including the possible removal of tools such as the dot plot.
The current global market volatility reflects uncertainty around his policy direction and a broader repricing of risk assets. Investors are cautious because they expect Warsh to remove the Fed’s easing bias from its official statement, effectively ending the expectation of cheap money for the rest of the year.
In this environment, the Indian equity market remains in a textbook time-and-price consolidation, with strong domestic liquidity acting as a cushion against repeated global macro shocks.
The author Vinod Nair is the Head of Research Geojit Investments Limited.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
