Rs 17L cr added! Sensex zooms 2,900 pts, Nifty closes near 24,000. Iran ceasefire among 5 key factors

Indian stock markets surged sharply on Wednesday, with the Sensex and Nifty zooming nearly 4% each, driven by a temporary US-Iran ceasefire, a steep drop in oil prices, and other supportive factors, extending gains for a fifth straight session.

Sensex rallied over 2,946 points to close at 77,562, while the Nifty50 gained around 874 points to close at 23,997. The sharp gains added nearly Rs 16.59 lakh crore to the total market capitalisation of all BSE-listed companies, taking it up to Rs 446 lakh crore.

IndiGo shares rallied 10% to emerge as the top gainer on the Sensex. In contrast, L&T, Adani Ports, Bajaj Finance, Bajaj Finserv, UltraTech Cement, Maruti Suzuki, Mahindra & Mahindra (M&M), Axis Bank, Eternal, and HDFC Bank rose 5-7%. Tech Mahindra was the only stock in the red on the benchmark index, trading with marginal losses.

IndiGo shares rallied over 8% to emerge as the top gainer on the Sensex. L&T, Bajaj Finance, Axis Bank, Mahindra & Mahindra (M&M), Maruti Suzuki and UltraTech Cement followed, gaining 6-8%. Bucking the trend, Tech Mahindra shares dropped more than 1% to close at the top loser on Sensex.

As the India Vix, which measures market volatility, plunged over 20% to 19.70, all sectoral indices on the NSE closed in the green. Nifty Realty and Nifty Auto led gains by rallying nearly 7% each. Nifty PSU Bank, Nifty Consumer Durables, Nifty Private Bank and others rose over 5%.

Today’s bull strike on Dalal Street was broad-based, with the optimism spilling over to the midcap and smallcap spaces as well. Nifty Midcap 100 and Nifty Smallcap 100 indices rallied more than 4% each. Around 2,960 stocks advanced on NSE, while 341 declined and 69 remained unchanged.

Why Stock Market is Up Today? key factors

1) Iran-US announce two-week ceasefire

US President Donald Trump said that Washington has agreed to a two-week pause in attacks and has received a 10-point proposal from Iran, which he described as a workable basis for negotiations. His comments provided much-needed relief to markets after his earlier warnings that Tehran must reopen the Strait of Hormuz or face total annihilation of an entire civilisation.

“This will be a double sided CEASEFIRE!” he wrote on Truth Social. “The reason for doing so is that we have already met and exceeded all Military objectives, and are very far along with a definitive Agreement concerning Longterm PEACE with Iran, and PEACE in the Middle East,” he added.

Iran agreed to allow safe passage through the Strait of Hormuz for two weeks. Iran’s Foreign Minister shares a statement on behalf of the Supreme National Security Council, which thanked leaders of Pakistan for brokering the talks. “In response to the brotherly request of PM Sharif in his tweet, and considering the request by the U.S. for negotiations based on its 15-point proposal as well as announcement by POTUS about acceptance of the general framework of Iran’s 10-point proposal as a basis for negotiations, I hereby declare on behalf of Iran’s Supreme National Security Council:” he said.

Pakistan, which has been ⁠mediating between US and Iran, requested a two-week extension to give diplomacy time to proceed. Iran's Supreme Security Council said negotiations with the United States would begin on April 10 in Islamabad, after it submitted its proposal via Pakistan, although it added that the talks did not signal an end to the war.

2) Oil prices below $100/barrel

The two-week halt to the raging war and Iran’s announcement of reopening the Strait of Hormuz provided a much-needed relief to the sky-rocketing rally in oil prices. Brent crude futures dropped around 14% to $94.36 per barrel, while WTI Crude fell more than 18% to $94.69 per barrel, as seen at 3.40 pm IST on Wednesday.

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) Bond yields drop

The yield on benchmark US 10-year notes declined sharply to 4.24%, while the 30-year bond yield fell to 4.84%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, dropped to 3.73%.

Rising bond yields typically are considered to redirect global capital flows away from Indian equities. The bond yields had sharply surged earlier during the Iran-US war for most of March.

4) Global markets rally

After Iran announced the reopening of the Strait of Hormuz as part of the ceasefire conditions, global markets surged. Japan’s Nikkei rallied over 5% while South Korea’s Kospi zoomed over 6%. Hong Kong’s Hang Seng surged nearly 3%, while China’s Shanghai Composite rallied over 2%.

In Europe, France’s CAC and Germany’s DAX gained over 4% each, while UK’s FTSE jumped more than 2%. Wall Street ended the previous session nearly flat, but futures suggest a gap-up opening for the American stock markets. Dow Jones futures were up nearly 3%, after the major indices closed with marginal gains and losses.

5) Rupee rallies

Rupee surged 47 paise to close at 92.59 against the US dollar after the US and Iran agreed to a two-week ceasefire. The Indian currency recently saw a massive decline, breaching the key psychological mark of 95 last week amid the raging Iran-US war. However, it has recovered some losses since the RBI last week stepped up its efforts to support the currency by barring banks from offering rupee non-deliverable forwards to resident and non-resident clients and preventing companies from ‌rebooking cancelled forward contracts.

RBI MPC meet outcome

Alongside the renewed optimism on Dalal Street came the RBI MPC meet’s outcome which was more or less in line with estimates. RBI Governor Sanjay Malhotra on Wednesday announced the decision taken by the central bank’s monetary policy committee to keep the repo rate unchanged at 5.25% amid global uncertainties. “High-frequency indicators up to February indicate sustained strength in economic activity,” Malhotra said.

Governor Malhotra noted that inflation has eased since the October policy, but cautioned against emerging risks. “Elevated crude oil prices could increase imported inflation and widen the current account deficit,” he added.

All is well?

Despite the optimism in the markets, some caution is warranted. Foreign investors continue to remain net sellers of Indian equities, weighing on investor sentiment on Dalal Street. FIIs remained net sellers of Indian equities for the 25th consecutive session, selling shares worth nearly Rs 8,692 crore on Tuesday, according to data on NSE. While this does not reflect today’s activity, sustained outflows in recent sessions have weighed on investor sentiment, even as domestic institutional investors remain net buyers.

Additionally, it is important to note that the ceasefire is conditional and temporary. Trump is notorious for his decision flip-flops, keeping the market sentiment fragile.

What lies ahead?

“The 2-week ceasefire between the US and Iran has dramatically altered the near-term market scenario. The crash in Brent crude to $ 95 following the ceasefire will again turn the market bullish. This ceasefire, particularly the agreed reopening of Hormuz Strait, will embolden the bulls to charge again, aided by the fair market valuations,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

The analyst noted that the RBI, aided by the crash in crude, will likely opt for a hold in rates today. “The policy stance will continue to be neutral. The upside risk to inflation and the downside risk to growth can now be managed well. Rupee will strengthen and this may even force the FPIs to turn buyers; at least they will have to cease the sustained selling, which will become irrational in the present context,” he added.

Nifty will cruise towards 24,000 in the near-term and further movements will depend on the evolving outlook, according to Vijayakumar, who explained that the sentiment is risk on again. “Beaten-down financials have the potential to stage a dramatic recovery. Crude-related stocks like refineries, aviation, capital goods companies with exposure to the Gulf region, paints and adhesives will be on a strong wicket,” 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)