The prospect of even a tentative truce was enough to cool global risk aversion, bringing investors back into equities and easing some of the anxiety that had gripped markets over the past couple of weeks. Global benchmark indices closed in the green, buoyed by the broader improvement in risk sentiment across markets.
Even Indian equity benchmark indices ended about 2% higher on Wednesday, as early signs that the West Asia conflict could be nearing an end lifted investor sentiment and brought back risk appetite. The optimism was sparked by reports that Iran has received a detailed 15-point ceasefire proposal from the US, raising hopes that diplomatic backchannels may finally be opening up.
-listed companies added ₹8.23 trillion to their market capitalization on Wednesday. Meanwhile, the Nifty 50 closed at 23,306.45, up 1.7%, while the BSE Sensex ended 1.6% higher at 75,273.45. The broader market also recovered, with Nifty Midcap 100 closing 2.3% higher and Nifty Smallcap 250 settling 2.5% higher.
India VIX, a gauge of market volatility and fear, also ended 0.4% lower on Wednesday.
Meanwhile, all sectoral indices on the NSE ended in the green too. Nifty Consumer Durables rose the most, up 3.5% followed by Nifty Financial Services Ex-bank gaining 2.8%.
The is now down over 7% since the US-Iran conflict began. The index had slipped more than 12% at one point amid peak geopolitical stress, but intermittent bouts of buying have helped it claw back nearly half of those losses.
Macro pressure cooker
“A correction of this magnitude warrants more aggressive equity investing, depending on risk appetite, as a reasonable part of the market is now fairly valued or offering better value than six to nine months ago,” said Harish Krishnan, chief investment officer of equity at Aditya Birla Sun Life AMC.
He feels it is not about predicting the next 3-6 months, but making decisions that shape wealth 5-10 years ahead.
Krishnan is increasing exposure to three areas: energy-intensive companies, where near-term challenges exist but prices are expected to normalize; domestic consumption, which remains a strong long-term story despite current weakness; and financials, which are undervalued despite stable earnings. To fund this, he is reducing exposure to auto OEMs and taking a cautious stance on investment-linked companies.
The rupee slipped to a fresh record low of 93.97 as high continued to weigh on it.
While there are early signs of US-Iran talks, disruptions in the Strait of Hormuz continue, keeping supply concerns and oil prices elevated. This crude risk is pushing up expectations for India’s import bill and keeping the rupee under pressure. Brent crude oil was trading at $93.43 per barrel.
“The crude spike has persisted as the conflict enters the fourth week. While statements by US President Donald Trump of a temporary ceasefire might lend some hope, the impact is likely to be limited until the endgame is clearer,” according to a 25 March report by Bernstein.
Fixed income and the swing factor
Bernstein’s highest-probability case yields a Nifty target of 26,000, a mild derating, implying a 13% upside from current levels and a 7% contraction from its target at the start of the year. The foreign brokerage has retained its neutral stance and believes the rupee will continue to see pressure this year at various points, which means that “the overall markets for 2026 could well be flat to slightly negative”.
On the other hand, India’s 10-year bond yield has risen by 3.2265 percentage points since the war began, suggesting some pressure but not a sharp selloff, and that the bond market is adjusting, not panicking.
Devang Shah, head – Fixed Income at Axis Mutual Fund, says markets are firmly in wait-and-watch mode, with clarity on the US-Iran deal and its fine print now being the key ‘swing factor’.
His base case is that a resolution comes through in the next 15-20 days; any delay, he cautions, could start feeding into higher inflation and softer growth. In that scenario, Shah sees Brent crude settling into ‘a new $75-85 acceptable normal’, and warns that if the deal stalls, it could spark chatter of a rate hike cycle in the second half of the year.
“If the conflict drags on, fixed income will be important; not just for diversification, but for stepping up allocation.”
For the bond market, Shah sees a potential sentiment shift between June and September, when India’s inclusion in the Bloomberg Global Aggregate Index could bring in $20–25 billion of inflows and lend a more constructive tone to fixed income.