A nascent recovery in Indian stocks is gathering pace, spurring bets that the market has turned a corner following a monthslong selloff that wiped out more than a trillion dollars in value.

The NSE Nifty 50 Index jumped more than 1% on Monday, erasing all its losses for 2025, as the central bank’s recent efforts to add liquidity and growing optimism over the economy revive investor sentiment. The rupee also erased this year’s losses.

“Confidence is coming back,” said Sonam Srivastava, founder of Wright Research in Mumbai. “There is expectation of earnings bottoming out. We are seeing a convincing recovery in various stocks and this rally definitely seems to have legs.”

A number of indicators of economic growth— including tax collections and power demand — have improved in recent weeks, boosting confidence following a selloff in stocks that started in September.

A “cyclical recovery” is underway, driven by a pickup in central government capital expenditure, a reduction in personal income taxes starting April and the central bank’s measures to improve liquidity, Citigroup Inc. analysts wrote in a research note last week.

The Nifty climbed as much as 1.5% Monday, heading for a sixth day of gains. The benchmark had dropped as much as 6.6% for the year when it set its lowest close so far in 2025 on March 4. At that point, global funds had pulled out more than $16 billion from the equity market.

The benchmark gauge is currently trading at about 19 times its forward earnings, in line with its 10-year average, after that reading was as high as 21 times when the market peaked in September.

“We believe the current rally will need to be backed by earnings, stronger economic growth fueled by monetary reflation and the return of foreign investors for sustained recovery,” said Ankita Pathak, a fund manager at Ionic Wealth. Still, an “intermittent pullback can’t be ruled out even hereon,” she said.

--With assistance from Bhaskar Dutta, Chiranjivi Chakraborty and Abhishek Vishnoi.

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