Sensex recovered over 2,946 points to close at 77,562, while the Nifty50 gained around 874 points to close at 23,997. The strong gains added nearly Rs 16.59 lakh crore to the total market capitalization of all companies listed on the BSE, taking it to Rs 446 lakh crore.
IndiGo shares surged 10% to emerge as the top gainer on the Sensex. On the other hand, 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 in the benchmark index and traded with marginal losses.
IndiGo shares surged 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 fell over 1% to close as the top Sensex loser.
When the India Vix, which measures market volatility, fell over 20% to 19.70, all sectoral indices on the NSE closed in the green. Nifty Realty and Nifty Auto led the gains by recovering almost 7% each. Nifty PSU Bank, Nifty Consumer Durables, Nifty Private Bank and others rose over 5%.
Today’s bullish strike on Dalal Street was broad and the optimism spread to the mid-cap and small-cap spaces as well. The Nifty Midcap 100 and Nifty Smallcap 100 indices rose over 4% each. Around 2,960 stocks rose on the NSE, while 341 fell and 69 remained unchanged.
Why is the stock market up today? key factors
1) Iran and the United States announce a two-week ceasefire
US President Donald Trump said Washington had agreed to a two-week pause in attacks and received a 10-point proposal from Iran, which he described as a viable basis for negotiations. His comments provided much-needed relief to markets after his previous warnings that Tehran must reopen the Strait of Hormuz or face the total annihilation of an entire civilization.
“This will be a double-sided CEASE FIRE!” he wrote in Truth Social. “The reason for doing so is that we have already met and exceeded all military objectives, and we are very advanced in a definitive agreement on long-term 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, thanking Pakistan’s leaders for mediating the talks. “In response to Prime Minister Sharif’s brotherly request in his tweet, and considering the United States’ request for negotiations based on its 15-point proposal, as well as the president’s announcement on the acceptance of the general framework of Iran’s 10-point proposal as a basis for negotiations, I hereby declare on behalf of the Supreme National Security Council of Iran,” he said.
Pakistan, which has been mediating between the United States and Iran, requested a two-week extension to give diplomacy time to move forward. Iran’s Supreme Security Council said negotiations with the United States would begin on April 10 in Islamabad after it submitted its proposal through Pakistan, although it added that the talks did not signal the end of the war.
2) Oil prices below $100 a barrel
The two-week cessation of the war and Iran’s announcement to reopen the Strait of Hormuz provided much-needed relief to skyrocketing oil prices. Brent crude oil futures fell around 14% to $94.36 per barrel, while WTI crude oil fell over 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, the first time since Russia’s invasion of Ukraine in 2022, and have remained above that level for most of the time since.
3) Bond yields fall
The benchmark 10-year US bond yield fell sharply to 4.24%, while the 30-year bond yield fell to 4.84%. The 2-year bond yield, which typically moves in step with the Federal Reserve’s interest rate expectations, fell to 3.73%.
Rising bond yields are generally seen as diverting global capital flows away from Indian stocks. Bond yields had risen sharply during the Iran-U.S. war for most of March.
4) Global markets rebound
After Iran announced the reopening of the Strait of Hormuz as part of the ceasefire conditions, global markets soared. Japan’s Nikkei rose more than 5%, while South Korea’s Kospi rose more than 6%. Hong Kong’s Hang Seng rose almost 3%, while China’s Shanghai Composite rose more than 2%.
In Europe, France’s CAC and Germany’s DAX gained more than 4% each, while the UK’s FTSE jumped more than 2%. Wall Street closed the previous session almost flat, but futures suggest a gap for US stock markets. Dow Jones futures rose nearly 3%, after the major indexes closed with marginal gains and losses.
5) Rupee rallies
The rupee rose by 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 drop, surpassing the key psychological mark of 95 last week amid the raging war between Iran and the United States. However, it has recovered some losses since the RBI last week stepped up efforts to support the currency by banning banks from offering non-deliverable rupee forward contracts to resident and non-resident customers and preventing companies from rebooking canceled forward contracts.
RBI MPC meeting result
Along with the renewed optimism on Dalal Street came the outcome of the RBI MPC meeting, 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 through February indicate sustained strength in economic activity,” Malhotra said.
Governor Malhotra noted that inflation has declined since the October policy but warned against emerging risks. “High crude oil prices could increase imported inflation and widen the current account deficit,” he added.
Is everything all right?
Despite the optimism in the markets, some caution is warranted. Foreign investors remain net sellers of Indian stocks, weighing on investor confidence in Dalal Street. FIIs remained net sellers of Indian stocks for the 25th consecutive session, selling shares worth nearly Rs 8,692 crore on Tuesday, according to NSE data. While this does not reflect today’s activity, sustained capital outflows in recent sessions have weighed on investor confidence, even as domestic institutional investors remain net buyers.
Furthermore, it is important to note that the ceasefire is conditional and temporary. Trump is known for his reversals, which keeps market sentiment fragile.
What awaits us?
“The two-week ceasefire between the US and Iran has drastically altered the near-term market scenario. The drop in Brent crude oil to $95 following the ceasefire will once again turn the market bullish. This ceasefire, particularly the agreed reopening of the Strait of Hormuz, will encourage bulls to strike again, helped by fair market valuations,” said VK Vijayakumar, chief investment strategist at Geojit Investments.
The analyst noted that the RBI, helped by the fall in crude oil, will likely opt to hold rates today. “The policy stance will remain neutral. The upside risk to inflation and downside risk to growth can now be well managed. The rupee will strengthen and this may even force FPIs to become buyers; at least sustained selling will have to stop, which will become irrational in the current context,” he added.
Nifty will approach 24,000 in the short term and further movements will depend on the evolution of the outlook, according to Vijayakumar, who explained that risk sentiment is increasing again. “The battered financial sectors have the potential to make a dramatic recovery. Crude-related stocks such as refineries, aviation, capital goods companies with exposure to the Gulf region, paints and adhesives will be strong,” he added.
(With contributions from agencies)
(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. They do not represent the views of The Economic Times)
