Indian equities are staging a strong rebound after a months-long selloff that wiped over a trillion dollars in value. On Monday, the NSE Nifty 50 Index rose by more than 1%, fully erasing its losses for 2025.

Investor optimism is being fueled by the Reserve Bank of India’s liquidity-boosting measures and positive signals from the economy. The rupee also recovered all of its year-to-date losses. “Confidence is returning,” said Sonam Srivastava, founder of Wright Research in Mumbai. “There’s an expectation that earnings have bottomed out. We’re seeing a convincing recovery across various stocks — this rally clearly has momentum.”

In recent weeks, key economic indicators such as tax collections and power demand have improved, strengthening belief in a “cyclical recovery.” According to Citigroup analysts, rising government capital expenditure, upcoming personal income tax cuts starting in April, and liquidity support from the central bank are key drivers of the rebound.

On Monday, the Nifty climbed as much as 1.5%, extending its winning streak to six consecutive sessions. In early March, the index had fallen as much as 6.6% for the year, with foreign investors pulling out over $16 billion from the market.

The index is now trading at around 19 times forward earnings, in line with its 10-year average. At its peak in September, that figure had reached 21.

“For a sustained recovery, we need support from corporate earnings, stronger economic growth, and the return of foreign investors,” said Ankita Pathak, fund manager at Ionic Wealth. “However, some pullbacks are still possible at this stage,” she added.