Why stock market rose today? Sensex soars over 1,200 points, Nifty settles above 24,200. 5 key factors explained

Indian stock markets rallied sharply on Wednesday, with the Sensex and Nifty rising over 1.6% each, as easing oil prices, renewed hopes of US-Iran peace talks and other factors boosted market sentiment.

Sensex gained over 1,264 points to close at 78,111, while Nifty 50 rose around 389 points, to settle at 24,231. The sharp gains added over Rs 9 lakh crore to the total market capitalisation of all companies listed on BSE, pulling it up to nearly Rs 458 lakh crore.

IndiGo, Zomato-parent Eternal, Power Grid, Tata Consultancy Services (TCS), Tech Mahindra, L&T, Asian Paints and Adani Ports jumped 3-4% to emerge as the top gainers on Sensex. Bharti Airtel, Axis Bank and ICICI Bank were the only stocks which closed in the red with marginal losses. This came as India VIX, which measures volatility in markets, tumbled over 8% to 18.76.

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 closed in the green, with Nifty IT and Nifty Consumer Durables gaining around 3% each to emerge as the top gainers.

Here are key factors behind today's market rally:

1) Renewed hopes for 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 of 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 below $100/barrel

After declining sharply overnight, oil futures edged up slightly on Wednesday. However, they comfortably remained below the crucial $100 per barrel mark. Brent crude futures were trading near $96 per barrel, while WTI Crude futures were at $92 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

Indian rupee remained nearly unchanged on Wednesday, closing at 93.3725. The rupee had opened 0.2% higher at 93.17 against the US dollar, as against the previous close of 93.3750.

“Rupee traded marginally stronger, supported by improving sentiment after the second round of US–Iran talks, which has led to a cooling in crude oil prices over the past two sessions. 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,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

“However, the situation remains fragile, as any setback in negotiations could quickly push crude prices higher again, reversing gains in the rupee. The currency continues to remain highly sensitive to developments around the Strait of Hormuz, which remains a key risk factor for global oil supply. In the near term, the rupee is expected to trade in a range of 93.10–93.65, with direction dependent on further geopolitical developments and oil price movement,” he added.

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 0.5%, after surging further earlier during the session to near its record high of 59,332, which it had hit in late February this year. South Korea’s Kospi surged more than 2% on Wednesday, while Hong Kong’s Hang Seng gained around 0.5%. China’s Shanghai Composite was in the green with marginal gains.

In Europe, Germany’s DAX inched up, while the UK’s FTSE saw a slight decline. On Wall Street, markets closed sharply higher yesterday, with the tech-heavy Nasdaq jumping nearly 2% and the S&P 500 gaining over 1%.

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 an alarm over the impact of the raging war and the resulting spike in oil prices on 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?

Optimism around potential U.S.–Iran negotiations supported a broad-based market sentiment, driving oil prices below USD 100 as expectations of talks outweighed concerns over supply disruption, said Vinod Nair, Head of Research at Geojit Investments. “Despite a muted Q4 outlook, investors remain encouraged by attractive valuations and a relatively better FY27 earnings outlook, indicating that the rally could sustain momentum in the near term,” he added.

The analyst further explained that the decline in India’s 10‑year bond yield and a drop in India VIX further signal stability. Sector‑wise, resilient demand expectations supported gains in the power and consumer durables indices, while easing global risk sentiment enabled the IT index to outperform, 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)