FOMO, flows trigger euphoric market rally. Time to pocket some gains?

FOMO, flows trigger euphoric market rally. Time to pocket some gains?

The bulls charged ahead with force, pushing the Sensex up 2,975 points — the biggest absolute gain in Indian market history. The Nifty jumped 3.82%, supported by broad-based buying, with over 2,414 stocks advancing on the NSE. But in the afterglow of this breathless rally, investors might do well to pause and consider three possible risks that suggest it could be time to take some money off the table.

1. Flows could reverse as US outlook improves

With US growth risks receding, capital may start moving back into the US in the immediate term. The dollar index is already firming up, which often signals a risk-off environment for emerging markets. The recent momentum in Indian equities—fuelled largely by global inflows since April 15—could see a short-term pause.

2. US-China trade thaw delays urgency for supply chain shifts

The reduction in US tariffs on China eases fears of a growth slowdown or a dumping wave—but it also dials down the urgency for US companies to diversify their supply chains. The ‘China Plus One’ boost for India will still come, but without the same urgency, timelines may stretch. This was reflected in the way some China Plus One stocks traded today.

3. China’s comeback trade may dilute India’s appeal

Chinese equities saw several false starts last year on stimulus hopes. That fizzled, and flows moved to India over the past weeks. But with clarity now emerging in China’s macro outlook, the tactical shift toward Indian equities could lose steam, especially if investors rotate back into undervalued Chinese names.

Today’s rally has been powered by FOMO and foreign flows. Many investors missed the sharp rebound since mid-April and are now scrambling to catch up. Meanwhile, strong foreign inflows combined with steady domestic participation have kept markets buoyant. But neither trend can be relied upon. Booking profits doesn’t mean turning bearish — it means staying smart in a market where elevated valuations are narrowing the path to big gains.