Stock market today: The Indian stock market witnessed sharp across-segments buying in the morning session on Monday, 25 May, with the benchmarks, the Sensex and the Nifty 50, rising more than 1% each.
The Sensex jumped over 900 points, or more than 1%, to an intraday high of 76,335, while the Nifty 50 also rose by over 1% to the day’s high of 23,989. The BSE 150 Midcap and the BSE 250 Smallcap indices also climbed by 1% each during the session.
Investors earned about ₹5 lakh crore as the overall market capitalisation of BSE-listed firms rose to nearly ₹468 lakh crore from ₹463 lakh crore in the previous session.
Why is the market rising?
Let’s take a look at some key factors behind the rise in the stock market:
1. Optimism over a potential US-Iran deal
Optimism over a potential boosted market sentiment, helping it to break the range it had been trading in last week.
According to reports, on Saturday said there was significant progress towards a peace deal with Iran and confirmed that the agreement would reopen the Strait of Hormuz, a critical waterway through which one-fifth of the global oil exports take place.
Trump, however, later said that the US will rush into any deal, and the U.S. blockade on Iranian ships in the Strait of Hormuz would continue until an agreement is signed.
While there is still no clarity on the terms and conditions of the deal both countries will agree on, as well as the timeline for a potential deal, markets are rising on hopes that the worst of the Middle East conflict is behind.
2. Crude oil prices tumble
Brent Crude, the international crude oil benchmark, dropped over 5% to trade below the $98 per barrel on Monday morning, offering a huge relief to market sentiment.
A sharp and sustained decline in oil prices will ease the strain on India’s fiscal position, decrease the risk of inflationary pressure, and improve the prospects of monetary easing.
“We are starting the week on a positive note. Crude has dipped by $5 to below $100 on expectations that the US and Iran are close to a deal. The market will wait and watch for clarity and certainty since many similar expectations have been belied since the start of the war. If this expected deal holds and crude drifts down, that can turn out to be a turning point for the market,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
3. Rupee rises further
The opened 35 paise higher at 95.34 against the US dollar on Monday, amid hopes of a potential resolution to the US-Iran conflict. Investor confidence also received a boost from recent comments by Reserve Bank of India (RBI) Governor regarding the domestic currency.
Malhotra told Mint that the central bank will do “whatever is required” to ensure orderly price discovery in the forex market.
“The appreciation in the rupee from the recent low of 96.96 is a welcome trend. Stability in the currency is necessary to bring back the FPIs who have been in a sustained sell mode. The resilience of the market during this period of crisis is a hugely positive factor. This is a reflection of partly the economy’s strength, and partly the confidence of Indian investors,” said Vijayakumar.
4. US dollar, bond yields decline
The dollar index declined by 0.30%, while US 10-year bond yields crashed nearly 2% to 4.49%, improving investors’ risk appetite for emerging market equities.
Can gains be sustained?
While the stock market is witnessing strong gains, there are concerns that the domestic market may not see a broad-based and sustained rally because it is still early to assess the second and third-order impact of elevated crude oil prices on India’s growth-inflation dynamics and corporate earnings.
Vijayakumar pointed out that for a sustained medium-term rally to happen, crude oil prices have to stabilise below the $90 per barrel mark, the rupee has to strengthen, and many other factors, like a decline in global bond yields and the AI trade running out of steam, should happen.
He said if the US-Iran peace deal happens and holds, and consequently crude declines to below the $90 level, that can turn out to be a turnaround for the Indian economy and markets. This development can stabilise the rupee, too, which in turn can incentivise FPIs to at least stop selling in India.
“The Q4 results have turned out to be better-than-expected. This can sustain after a temporary dip in Q1 FY27. Markets have an ability to surprise, anticipating potential positive trends,” said Vijayakumar.
Ajit Mishra, SVP of Research at Religare Broking, said while the rally in Indian equities following optimism around a potential US-Iran deal is largely being driven by the hope of lower crude oil prices, easing inflation pressures, and improved global risk sentiment, the sustainability of the upmove over the medium term will depend less on geopolitics and more on domestic macro fundamentals.
“While softer oil prices could provide temporary relief to the rupee, bond yields, and inflation outlook, markets still face key challenges including weak earnings growth, expensive valuations, persistent FPI outflows, and slowing consumption trends,” Mishra said.
“Any disappointment on the earnings front or renewed global uncertainty could trigger volatility again. Therefore, the current rally may continue in the near term, but a durable medium-term uptrend would require clear improvement in corporate earnings, stronger domestic demand, and stability in global liquidity conditions,” said Mishra.
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Disclaimer: This story is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.