Mumbai: A wave of optimism swept through global markets on reports that the US and Iran had agreed on a deal to end the war, with the agreement expected to be signed in Switzerland on Friday. Whipping up more optimism, US President Donald Trump said the Strait of Hormuz would reopen and the US naval blockade of Iran would be lifted, raising hopes of smoother energy supplies and easing geopolitical tensions. The shift in sentiment revived investor appetite for equities, lifting markets across Asia, Europe and India.
The relief rally was broad-based. Asian markets led the charge, with Japan’s Nikkei and South Korea’s Kospi surging over 5%, while China’s Shanghai Composite gained nearly 2%. The upbeat mood spilled over into Europe, where Germany’s DAX and France’s CAC 40 rose about 1%.
Indian equities joined the global rally, with the Nifty 50 climbing 1% to close at 23,853.90 and the Sensex gaining 1% to settle at 76,264.33. Benchmark Indian equity indices gained nearly 2% intraday, but the Nifty 50 saw some profit taking after crossing the psychologically crucial 24,000 mark during the session. Nifty 50 hit an intraday high of 24,011.40 on Monday.
Among the top performers were Trent (+5.3%) and HDFC Life Insurance Co. (4.7%).
The optimism was more pronounced beyond the frontline indices on Monday, with broader markets outperforming the blue-chips. The Nifty Midcap 100 and Nifty Smallcap 250 gained 1.3% each.
That said, the top performers among the Nifty sectoral indices were Nifty Realty, which surged nearly 4%, and Nifty Consumer Durables, which gained bout 3%.
Institutional flows were positive on Monday, with foreign institutional investors (FIIs) net buying ₹200.05 crore worth of Indian equities and domestic institutional investors (DIIs) pumping in a net ₹3,189.26 crore, as per provisional BSE data.
In a nutshell, the US-Iran agreement is a positive development for Asia, especially energy-importing economies such as India, as it reduces geopolitical risks around the Strait of Hormuz and helps stabilize energy costs, said market participants.
For India, the development could lower crude import bills, ease inflation and current account pressures, support rupee stability, improve corporate margins, and restore smoother shipping and trade flows, some said.
Relief run
“This is a massive, short-term relief,” said Dhiraj Relli, managing director and chief executive officer at HDFC Securities.
It reduces uncertainty around two key drivers of India’s macro outlook—oil and gas imports and remittances from West Asia. Oil prices and currency markets are already beginning to price this in, Relli added.
If the agreement holds, he expects investor confidence to further improve. “We believe this will play out over the next four weeks with a close eye on any developments that could derail the peace process.”
Nilesh Shah, the managing director of Kotak Mahindra AMC, said the deal de-risks a key vulnerability for India’s economy, complementing domestic factors such as capital expenditure and consumption.
Shah said that as supply chains normalize and energy prices ease over the medium term, aviation and logistics could benefit from lower fuel costs, while FMCG, paints and auto companies may see margin support from reduced input and transportation expenses. Banking and financials could also gain from improved liquidity and a softer rate outlook, while oil marketing companies may benefit from cheaper crude, he said.
Export-oriented manufacturers could see support from stronger global demand and rupee stability, and select domestically focused mid-caps may benefit from broad-based cost relief, Shah added.
Vipul Bhowar, executive director and head of equities at Waterfield Advisors, expects a short-term recovery in the paints and specialty chemicals sectors, as lower crude oil prices improve margins without companies having to raise prices. He said the aviation and logistics sectors will be key in the tracking of the impact of the peace deal. The end of the naval blockade could stabilize freight and shipping insurance costs, while lower jet fuel prices are likely to support airline profitability.
He also sees potential in tyre makers and export-oriented auto component companies, which could benefit from lower raw material costs and smoother global shipping, helping ease inventory issues.
“We foresee a split in the energy sector, with upstream oil exploration firms facing short-term difficulties, while downstream oil marketing companies (OMCs) are expected to see a significant increase in marketing margins shortly.”
Return of inflows?
The deal has also put the spotlight back on foreign inflows, with easing geopolitical tensions and lower energy costs strengthening the case for overseas investors to revisit India. As macro risks recede and stability improves, market participants believe India could once again move higher on global investors’ radar.
According to Nilesh Shah, the deal could partially improve FII sentiment in the near term. Easing geopolitical tensions, along with lower oil prices and a more stable rupee, have already triggered selective FII re-entry and boosted the overall risk appetite. Emerging Asian markets such as India could also benefit from a reallocation of funds away from safer assets, he said.
Shah, however, noted that any reversal in FII sentiment is unlikely to be complete or immediate. Foreign investors remain selective, with many still favouring AI-led and global growth themes elsewhere. The sustainability of flows into India will also depend on domestic factors such as the monsoon, corporate earnings and fiscal policy. While the deal provides a catalyst for renewed interest, sustained buying will require further follow-through, he said.
Barring a brief return to buying in February, FIIs have remained net sellers of Indian equities throughout 2026. In contrast, DIIs have consistently played the role of market stabilizers, staying net buyers across all months of the year.
Market cues ahead
According to market participants, the interest rate cycle is back in focus, with Europe having already raised rates and the US and India potentially following suit in the final quarter of the year amid lingering inflation concerns.
Corporate earnings will be another key factor to monitor, as the fallout from the West Asia tensions and monsoon-related uncertainties continues to cloud the earnings visibility for FY27.
Lastly, domestic flows remain crucial. Indian retail investors have displayed remarkable resilience and maturity, staying the course with their investments and maintaining contributions in mutual fund systematic investment plans (SIPs) despite bouts of market volatility.