Mumbai, May 13 -- A surge of optimism swept over the Indian markets as war clouds receded and the tariff clash eased, lifting stocks by the highest in more than four years. Over the weekend, India and Pakistan agreed to end four days of conflict, while the US and China agreed to slash tariffs for 90 days. Stocks took off in response, turning investors wealthier by Rs.16 trillion, the most since May 25, 2021. The Nifty 50 shot up 3.8% to close at 24,924.70, while the S&P BSE Sensex rose 3.7% to 82,429.90, the biggest gain for both since February 1, 2021. The BSE's market capitalization touched Rs.430 trillion, in a broad-based rally fuelled by both short-covering and delivery-based buying. With the easing of tensions, focus now shifts to earnings, interest rates and consumption trends. While some see more stability and less volatility ahead, others expect emerging markets such as India's to outperform in the coming years. "With the ceasefire now in place, the hanging sword of uncertainty around potential economic damage has been effectively neutralized," said A. Balasubramanian, MD and CEO of Aditya Birla Sun Life AMC Ltd. "With that risk out of the way, sidelined investors stepped in, and a bit of short-covering added to the momentum." After last week's fears that a prolonged conflict could cast drag the economy, the mood shifted quickly on Monday, he said. The rally was powered by IT and financial services sectors, with heavyweights such as Infosys, Larsen & Toubro, HDFC Bank and Reliance Industries contributing the most to the Nifty's gains. The enthusiasm was infectious, with all sectoral indices higher at close. The Nifty Midcap 100 and Nifty Smallcap 250 rose 4% each. One in eight stocks gained. On the NSE, 2,614 stocks advanced while only 329 declined. FIIs net bought shares worth Rs.1,246 crore and DIIs net bought shares worth Rs.1,448 crore on Monday, as per NSE. Since May 5, FIIs have net bought shares worth Rs.8,634 crore and DIIs have net bought shares Rs.11.898 crore. FIIs have been continuously buying for the last 17 sessions, except on May 9 when they net sold shares worth Rs.3,798 crore. The India VIX, the market's fear gauge, tumbled 15%, signalling relief. According to Balasubramanian, the recent spike in volatility was more a knee-jerk reaction than a lasting trend. "Markets tend to react sharply to surprises. But as the noise fades, volatility will cool off and make room for a more stable, positive structure," he said. The weekly options data on NSE showed that option sellers, who had bet on the Nifty staying below 24,450, were caught off-guard and rushed to cover their positions. The surge in cash-based buying reflected in the NSE's turnover which jumped to Rs.1.07 trillion, up from Friday's Rs.94,551 crore. The Nifty could face resistance further at 25,350 and support at 24,500 this week. While tariff-related risks appear limited, stable oil prices, easing interest rates, and a recovery in mass consumption also aid earnings resilience, said Neelesh Surana, chief investment officer, Mirae Asset Investment Managers (India). He is optimistic about stocks in mass consumption sectors, particularly consumer discretionary, over the medium to long term. March quarter earnings have been better than expected, Shah noted. Of the 109 companies that have reported earnings, profits were initially expected to decline by around 2%, but in reality, there has been a 6% growth. Ram Sahgal contributed to this story....