Sensex gained over 1,200 points to trade above the 78,000 level, while Nifty 50 rose over 350 points, topping the 24,200 level. The sharp gains added more than Rs 7.5 lakh crore to the total market capitalisation of all companies listed on BSE, pulling it up to nearly Rs 457 lakh crore in the early trading hours.
All constituents of Sensex traded in the green, with IndiGo, UltraTech Cement, L&T, Bajaj Finance, Infosys, Asian Paints and Bajaj Finserv jumping 2-4% to emerge as the top gainers on the index. This came as India VIX, which measures volatility in markets, tumbled 11% to 18 in the morning.
The renewed optimism on Dalal Street was broad-based, with Nifty Smallcap 100 and Nifty Midcap 100 indices rallying more than 2% each. All sectoral indices on NSE opened in the green, with Nifty PSU Bank rallying around 3% to lead gains.
Here are key factors behind today’s market rally:
1) Renewed hopes for fresh Iran-US peace talks
Pakistani officials cited by the Associated Press indicated on Tuesday that Islamabad has proposed a second round of talks to the United States and Iran, while US Vice President JD Vance earlier said negotiations with Iran “did make some progress” and US President Donald Trump said earlier “we’ve been called by the other side” and “they want to work a deal.”
Trump hinted at the second round talks saying Iran talks ‘could be happening over next two days’ in Pakistan, as quoted by Reuters, citing NY Post. He said that Washington was more ‘inclined’ to go to Pakistan for the peace talks that could possibly bring an end to the nearly seven week-long war in the Middle East. The renewed hopes for fresh peace talks, after the previous round collapsed over the weekend, boosted investor sentiment.
2) Oil prices below $100/barrel
After declining sharply overnight, oil futures edged up marginally on Wednesday morning. However, they comfortably remained below the crucial $100 per barrel mark. Brent crude futures were trading near $95 per barrel, while WTI Crude futures were at $91 per barrel.
Oil prices crossed the crucial $100 mark in March after the closure of the Strait of Hormuz, marking the first time since Russia’s invasion of Ukraine in 2022, and have sustained for the majority of the time over that level since then.
3) Rupee ticks higher
Indian rupee opened 0.2% higher at 93.17 against the US dollar on Wednesday, as against the previous close of 93.2750. Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities had said that rupee is expected to trade in a range of 92.75–94.00 in today’s session.
4) Bond yields fall
US bond yields declined amid the renewed optimism and resulting risk-on sentiment. The yield on benchmark US 10-year notes dropped to 4.248%, while the 30-year bond yield fell to 4.857%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell to 3.749%.
5) Global markets rally
As a result of the optimism around fresh peace talks, global markets rallied. Japan’s Nikkei jumped more than 1%, nearing its record high of 59,332 which it had hit in late February this year. South Korea’s Kospi surged nearly 3% on Wednesday morning, while Hong Kong’s Hang Seng gained more than 1%. China’s Shanghai Composite was in the green with marginal gains.
Wall Street and European markets had closed in the deep green yesterday. Tech-heavy Nasdaq jumped nearly 2% while S&P 500 gained more than 1% in the US. Meanwhile in Europe, Germany’s DAX and France’s CAC gained more than 1% each while UK’s FTSE closed with marginal gains.
More support for the bulls
Prime Minister Narendra Modi took to X late on Tuesday to say that he received a call from US President Donald Trump. “We reviewed the substantial progress achieved in our bilateral cooperation in various sectors. We are committed to further strengthening our Comprehensive Global Strategic Partnership in all areas,” he wrote.
The Prime Minister also added that they discussed the situation in West Asia, and “stressed the importance of keeping the Strait of Hormuz open and secure”. This comes as the ceasefire talks between Iran and US, brokered by Pakistan’s Prime Minister Shehbaz Sharif and army chief Asim Munir failed to culminate into a peace deal over the weekend, leading to a sharp selloff in global markets on Monday.
Additionally, the International Monetary Fund (IMF) has slightly upgraded India’s GDP growth forecast for FY27 to 6.5%, by 0.1 percentage point from its January projection, even as it warns that escalating geopolitical tensions, especially the war in the Middle East, will weigh on global momentum and push inflation higher in the near term. In its latest World Economic Outlook/Global Financial Stability Report update titled Global Financial Markets Confront the War in the Middle East and Amplification Risks, the IMF said growth is expected to remain steady at 6.5% in FY28.
This comes after several analysts sounded alarm over the impact of the raging war and the resulting spike in oil prices over India’s macroeconomics, which led to a sharp selloff on Dalal Street in March.
Bears hiding behind the bulls?
Despite the renewed optimism, some caution is warranted. Foreign investors remained net sellers of Indian equities on Monday, net selling shares worth more than Rs 1,938 crore. This comes after they broke a 27-session long selling streak on Friday, net purchasing Indian equities worth Rs 672 crore, although it was negligible when compared to the massive selloff seen overall recently.
Additionally, Trump is notorious for his decision flip flops and the peace talks have already once failed, keeping investors on the edge and sentiment fragile.
What should investors do?
Hopes of resumption of US-Iran talks, Israel-Lebanon talks and crash in Brent crude by $10 dollars in two days augur well for the market in the near-term, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He added that the resilience of markets worldwide, despite the IMF’s warning about a global recession if the conflict prolongs, is an indication that the market is discounting an end to the conflict soon.
“In the extremely volatile scenario through which markets have been moving, it is important that investors remain invested. The benefit from sharp rebounds in the market will be lost to investors who sell out and keep away from the market,” he said.
In the near-term large caps are likely to stage a smart comeback, but may again face headwinds when FIIs resume selling, according to the analyst. “The excellent performance of South Korean and Taiwanese markets and the significant market momentum there might nudge FPIs to sell again in India. Sustained resilience in the near-term is likely to be in mid and small caps which will not come under the pressure of FPI selling,” he added.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)