Domestic equity markets staged a sharp intraday recovery on Thursday, July 31, 2025, as easing crude oil prices, positive global cues, and renewed optimism over U.S.-India trade talks fueled a bounce-back in benchmark indices.

After plunging as much as 786 points to hit 80,695.15, the Sensex rebounded 650 points, touching an intraday high of 81,345.69. Similarly, the Nifty 50 recovered from a session low of 24,635, rising above the psychological mark of 24,800, and was last seen trading at 24,822.40.

Here are the five major drivers behind the market’s sharp recovery:

Hopes of a U.S.-India Trade Breakthrough:
Market sentiment improved after U.S. President Donald Trump announced a proposed 25% tariff on Indian goods but emphasized that trade talks with India will continue. Analysts view the tariff threat as a negotiation tactic, with expectations that actual duties may be lower. The upcoming mid-August round of talks has raised hopes for a diplomatic resolution.

Crude Oil Price Decline:
Brent crude futures slipped 0.19% to $73.10 per barrel, providing relief to Indian markets. As a major oil importer, India stands to benefit from lower crude prices, which can help moderate inflation and ease pressure on the fiscal deficit.

Positive Global Market Cues:
Asian equities were in the green, with Japan’s Nikkei 225 up nearly 1.5%, while U.S. stock futures indicated a strong Wall Street opening, reflecting a broader risk-on sentiment that spilled over into Indian markets.

Rupee Pulls Back from Record Low:
The Indian rupee recovered 14 paise from its all-time intraday low, trading at 87.66 against the U.S. dollar. Earlier in the session, the rupee had dropped by as much as 89 paise—its steepest fall in over three years—amid fears stemming from the U.S. tariff move and potential sanctions linked to Russian crude and defence deals. Hopes of RBI intervention supported the rupee’s rebound.

Fed Rate Cut Speculation Builds:
Although the U.S. Federal Reserve held interest rates steady, signs of internal division emerged. Fed Vice Chair Michelle Bowman and Governor Christopher Waller expressed support for a rate cut, leading traders to price in the possibility of a policy easing in September. This added to the global liquidity optimism that lifted emerging markets like India.

With macro indicators stabilizing and external headwinds appearing less severe than initially feared, traders and investors found fresh momentum heading into August.