The Indian stock market witnessed strong buying interest on Wednesday (April 8) morning, with the benchmark indices- the Sensex and the Nifty 50- vaulting almost 4%.
The jumped nearly 2,800 points, or almost 4%, to an intraday high of 77,392, while the NSE counterpart jumped over 800 points, or 3.5%, to the day’s high of 23,939.
The rally was broad-based as the mid and small-cap segments also jumped by up to 4%.
The volatility index India VIX plunged by more than 19% to fall below the 20 level in early deals, reflecting easing market nervousness.
The overall market capitalisation of BSE-listed firms jumped to ₹443 lakh crore from ₹429 lakh crore in the previous session, making investors richer by ₹14 lakh crore within minutes.
Why is the Indian stock market rising today?
Here are five key factors behind the rise in the Indian stock market:
1. US-Iran ceasefire
US President announced Washington will suspend military actions against Iran for two weeks. Iran has also accepted the plan.
Moreover, talks between the US and Iran will begin in Islamabad on Friday. The market is cheering the prospects of a final announcement about the end of the West Asian war in the coming few days.
“The two-week ceasefire between the US and Iran has dramatically altered the near-term market scenario. The crash in Brent crude to $ 95 following the ceasefire will again turn the market bullish. This ceasefire, particularly the agreed reopening of Hormuz Strait, will embolden the bulls to charge again, aided by the fair market valuations,” VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.
2. Crude oil prices crash
Brent Crude prices crashed 14% to drop below $95 a barrel, infusing positive sentiment into the stock market, as hopes prevailed that uninterrupted supply through the Strait of Hormuz could resume soon.
A crash in crude oil prices is a major relief for the Indian economy and stock market. A sustained fall in crude oil prices can improve the Indian economy’s growth outlook, support the currency, and may brighten the prospects of foreign capital inflows.
3. Dollar falls over 1%; rupee jumps
The dollar index declined by more than 1% to 98.84 amid a crash in crude oil prices and easing geopolitical tensions.
Meanwhile, the Indian rupee gained further in early deals on Wednesday, influencing domestic market sentiment. As per PTI, the rupee surged 50 paise to 92.56 against the US dollar in early trade on Wednesday after the US and Iran agreed to a two-week ceasefire.
A weaker dollar and stronger rupee can nudge foreign portfolio investors to change their stance on Indian equities.
“Rupee will strengthen, and this may even force the FPIs to turn buyers; at least they will have to cease the sustained selling, which will become irrational in the present context,” said Vijayakumar.
4. Positive global cues
Positive global cues also influenced domestic market sentiment. After the US-Iran ceasefire announcement, major Asian markets, including Korea’s Kospi and Japan’s Nikkei, jumped up to 6%.
According to Bloomberg, strategists believe the ceasefire between the US and Iran brings welcome relief to even as volatility may continue due to the lack of clear details on the agreement and concerns over the Strait of Hormuz.
5. RBI MPC in focus
The market expects the Monetary Policy Committee (MPC) to keep unchanged at 5.25%, and maintain policy stance at ‘Neutral’. Amid positive developments on the West Asian war front, the market expects the Reserve Bank of India (RBI) not to change the growth and inflation forecasts materially.
“RBI, aided by the crash in crude, will opt for a hold in rates today. The policy stance will continue to be neutral. The upside risk to inflation and the downside risk to growth can now be managed well,” said Vijayakumar.
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