Sensex jumped over 600 points to trade above the 78,700 level, while Nifty 50 gained around over 150 points, rising above 24,350 level on Thursday. The sharp gains added more than Rs 2.5 lakh crore to the total market capitalisation of all companies listed on BSE, pulling it up to Rs 462 lakh crore.
Zomato-parent Eternal, Infosys, Zudio-operator Trent, L&T, IndiGo, and ICICI Bank were among the top gainers on Sensex, rising up to 2%. Bucking the trend, heavyweight Reliance Industries (RIL) shares, however, declined marginally to emerge as the top loser. This came as India VIX, which measures volatility in the markets, declined around 3% to 18.18 in the morning.
The rally on Dalal Street was broad-based, with the Nifty Midcap 100 and Nifty Smallcap 100 indices gaining more than 1% each. Sectorally, Nifty Realty gained around 2% to emerge as the top sectoral gainer on NSE. While 2,235 stocks advanced on the stock exchange, 255 declined and 49 remained unchanged.
Here are six key factors behind today’s market rally:
1) Iran-US war to end soon?
The hopes for an earlier end to the raging war between Iran and the US continued to boost global markets. Officials from the two countries are reportedly mulling a return to Pakistan in order to hold talks as early as this weekend, after the previous round of negotiations failed to culminate in a peace deal last weekend. Pakistan’s army chief and key figure in the mediation, Field Marshal Asim Munir, arrived in Tehran on Wednesday to try to prevent a renewal of the conflict. Iranian Foreign Minister Abbas Araqchi posted on X, welcoming Munir and saying Tehran was committed to “promoting peace and stability in the region.”
“We feel good about the prospects of a deal,” White House press secretary Karoline Leavitt said at a news conference on Wednesday, calling conversations mediated by Pakistan “productive and ongoing.”
Meanwhile, Israel’s cabinet met on Wednesday to discuss a possible ceasefire in neighbouring Lebanon, a senior Israeli official cited by Reuters said, more than six weeks into its war with Iran-backed Hezbollah. A ceasefire could be announced soon, the Financial Times reported, citing Lebanese officials. Notably, the conflict in Lebanon was one of the key points for the failure in the previous round of peace talks, along with Iran’s nuclear ambitions.
2) Oil prices cool down below $95/bbl
As a result of the rising expectations of a sooner end to the raging war in the Middle East, the skyrocketing rally in oil prices continued to cool down as investors increasingly hopes for normal traffic to resume through the Strait of Hormuz, a critical chokepoint whose closure has rattled global oil markets.
After crossing the crucial $100 per barrel mark in March and remaining above that level for the most of the time since then, oil prices have comfortably fallen below the crucial mark now amid the optimism. Brent crude futures declined below $95 per barrel while WTI Crude was hovering near $91 per barrel on Thursday morning.
3) FIIs turn net buyers
Foreign investors remained net buyers of Indian equities on Wednesday, net purchasing shares worth more than Rs 666 crore. However, this is negligible when compared to the massive selloff by the foreign investors seen earlier. FIIs have remained net buyers for only two out of 30 consecutive sessions. They net sold Indian equities worth more than Rs 1.6 lakh crore between March 2 and April 9.
After the massive selloff, it is difficult to say whether yesterday’s slight net buying by foreign investors marks a decisive change in their behavior or just the calm before another storm.
4) Rupee rises
Rupee opened 0.1% higher at 93.2750 against the US dollar on Thursday, as against the previous close of 93.3725. The Indian currency has recovered slightly, after the raging war had sent it to a tailspin, pushing it across the historical mark of 95 against the US dollar before RBI stepped in.
“Lower crude, now slipping towards the $94–95 range, is easing pressure on India’s import bill and providing short-term relief to the currency. However, the situation remains fragile, as any setback in negotiations could quickly push crude prices higher again, reversing gains in the rupee,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, who cautioned that the currency continues to remain highly sensitive to developments around the Strait of Hormuz, which remains a key risk factor for global oil supply.
5) 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 4.272%, while the 30-year bond yield rose marginally to 4.892%, although it is sharply down from its near-term highs. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, fell to 3.749%.
6) Rally in global markets
The bulls on Dalal Street accompany those on other markets, with Japan’s Nikkei jumping more than 2% to hit a fresh all-time high after erasing all losses recorded during the March selloff. South Korea’s Kospi gained nearly 2% while Hong Kong’s Hang Seng gained over 1.5%.
On the Wall Street, tech-heavy Nasdaq gained around 1.6% during yesterday’s session while S&P 500 jumped 0.8%. European markets ended mixed yesterday, with France’s CAC and UK’s FTSE closing in the red and Germany’s DAX closing in the green.
What lies ahead?
“It has been 47 days since the war began. What is the message from the markets? Brent crude is down to $95 level from the recent peak of $119. S&P 500 set a new record yesterday at 7022. Nasdaq also is at a new record high. The message from the crude market and the US stock market is that the West Asian conflict is unlikely to last long. The stock market is discounting an early end to the conflict,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
The analyst noted that back home, Nifty has rallied 12% following the war-led sharp correction. The index is up around 2,000 points from the lows it had touched around March 30. He highlighted that mid and small caps have outperformed the large caps. In fact the small cap index is slightly above the pre-war level and mid cap index is only marginally lower by around 0.5% while Nifty is down by about 3.8% from the pre-war levels, he said.
According to Vijayakumar, the underperformance in large caps can be attributed to the strong FII selling seen earlier, and the outperformance of the broader market may continue in the near-term. “Investors should watch the stocks which are hitting 52-week highs even in a weak market. Such stocks reflect fundamental strength and accumulation by smart money,” 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)
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