Indian stock markets surged today, with the Sensex jumping over 700 points and the Nifty 50 crossing the 26,000 mark. This bullish trend follows a period of gains, with investors displaying renewed confidence in domestic equities. Several key factors are contributing to this upswing:

1. Positive Sentiments from a Potential India-US Trade Deal: Optimism surrounding a potential trade agreement between India and the United States is a primary driver of the market's rise. Reports suggest that the US may significantly reduce tariffs on Indian imports, potentially cutting them to 15-16% from the current 50%. Such a move is viewed as a game-changer that could boost India's trade competitiveness and exports. President Trump's positive comments about a trade deal with India, coupled with Prime Minister Modi's responses, have further fueled these expectations.

2. Strong Inflows from Foreign Institutional Investors (FIIs): After a period of net selling, foreign institutional investors have turned into net buyers in October, injecting over ₹7,300 crore into Indian equities. This reversal in FII sentiment is a significant factor driving the market higher. Alok Agarwal, Head – Quant and Fund Manager at Alchemy Capital Management, noted that the previous FII underweight stance on India was at its highest since 2009, suggesting potential for further inflows as earnings recover.

3. Robust Q2 Earnings Expectations: Market analysts anticipate a recovery in corporate earnings, particularly in the banking sector, with improvements in margins and lending. Top IT companies are also expected to deliver better-than-expected numbers. These positive earnings expectations are bolstering investor confidence and driving market momentum.

4. Favorable Macroeconomic Factors: India's resilient macroeconomic setup, characterized by moderating inflation, a stable rupee, and record foreign exchange reserves, is also contributing to the market's positive performance. The Indian economy is projected to grow between 6.5% and 7% for the current year, making it one of the strongest growth stories among major global economies.

5. Technical Factors and Market Momentum: The Nifty 50 has been exhibiting a strong bullish setup, with every dip being swiftly bought into, a hallmark of a healthy uptrend. Sustained moves above the 26,000 mark could ignite fresh buying momentum and trigger short-covering, potentially driving the index higher. Analysts recommend a "buy-on-dips" strategy, as long as the Nifty trades above its critical support band.

While the overall sentiment is bullish, analysts advise caution and suggest monitoring global developments, including US inflation data and interest rate decisions. They also recommend that traders maintain a "buy-on-dips" approach and book partial profits during rallies to manage risk effectively.