In a significant turnaround, Indian stock markets surged on Monday, buoyed by the announcement of a ceasefire between India and Pakistan. The Nifty 50 and BSE Sensex indices each climbed over 3%, marking their most substantial single-day gains in nearly a year. This rally comes after a period of heightened tensions that had previously unsettled investors and led to substantial market losses.

The ceasefire, brokered over the weekend, has been welcomed by investors as a step towards regional stability. Analysts suggest that the de-escalation allows markets to refocus on economic fundamentals and growth prospects. Barclays, for instance, maintained its projection of a 6.5% growth rate for India in the fiscal year 2025-26, citing the country's resilience to global trade uncertainties and progress in trade discussions with the United States.

The positive sentiment was reflected across various sectors. Small- and mid-cap indices outperformed, rising by 3.5% and 3.1% respectively. The financial and IT sectors saw gains of 3.1% and 2.4%, while tourism stocks rebounded by 4%. However, the pharmaceutical sector experienced a slight decline of 0.7%, following U.S. President Trump's announcement of executive measures to reduce drug prices.

Globally, markets also responded positively to developments in U.S.-China trade negotiations, further easing recession fears. The combination of regional de-escalation and international trade progress has contributed to a more optimistic outlook among investors.

While the ceasefire has provided immediate relief to the markets, analysts caution that sustained peace and continued diplomatic efforts will be crucial for long-term stability and investor confidence.