The Indian stock market traded with strong gains on Friday, following upbeat cues from global markets, on hopes of a US-Iran peace deal and an end to the war in West Asia. The benchmark indices, Sensex and Nifty 50, jumped over 1% each, led by buying across the board.
The BSE Sensex jumped 887.19 points, or 1.20%, to 74,719.74, while the NSE traded at 23,396.15, up by 234.55 points, or 1.01%. The index was up 716.35 points, or 1.30%, at 55,880.15.
Broader markets supported the rally, with the Nifty Midcap 100 and the indices surging 1.5% each.
All the sectoral indices traded higher, led by Nifty Auto, Nifty Realty, Nifty Private Banks, Nifty PSU Bank and Nifty Metals gaining the most.
Globally, equity markets rallied on easing geopolitical tensions, which led to a significant drop in crude oil prices.
“While a formal agreement is still pending, market participants will closely watch whether the easing geopolitical backdrop can trigger a meaningful turnaround in foreign portfolio flows. Persistent FPI selling over recent months has remained one of the key factors capping a sustained recovery in Indian equities,” said Ponmudi R, CEO of Enrich Money.
Here are five key reasons behind the rally in Indian stock market today:
1. US-Iran Peace Deal Hopes
Geopolitical tensions eased after US President Donald Trump canceled his planned strikes against Iran. Trump said the as soon as this weekend that would reopen the Strait of Hormuz to shipping, but Iran countered that it had not reached a final decision on an agreement.
2. Global Markets Rally
Global markets responded positively to the development, with US stock market closing with strong gains overnight. The rallied 929.97 points, or 1.86%, to 50,848.75, while the S&P 500 jumped 127.31 points, or 1.75%, to 7,394.30. The Nasdaq Composite closed 640.16 points, or 2.54%, higher at 25,809.66.
Asian markets extended the rally, led by Japan’s Nikkei, up over 4%, and South Korea’s Kospi, which surged more than 8%, reflecting a broad-based recovery.
3. Falling Crude Oil Prices
Crude oil prices extended losses from the previous session after Trump cancelled plans to strike Iran. Brent futures fell 2% to $88.55 a barrel, while US West Texas Intermediate (WTI) crude dropped 1.8%, to $86.11.
India’s is the world’s third-largest oil importer and consumer. Lower oil prices are positive for India as they help ease inflationary pressures, reduce the import bill, and support corporate earnings.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments expects more the potential for more downside in crude oil prices if the US-Iran agreement becomes real.
“Two consequences are likely from this development. India will succeed in managing the BoP crisis that we have been facing since the beginning of the war. Rupee will stabilise and strengthen mildly. Since FIIs are hugely short in the market, there will be short-covering triggering a rally,” said Dr. VK Vijayakumar.
4. Banking Stocks Rally
Heavyweight banks and financials surged, heading for their third gain in four sessions, after the Reserve Bank of India (RBI) detailed a concessional facility for banks’ overseas foreign-currency borrowings.
“As banks swap dollar deposits with the RBI, this should improve their rupee liquidity positions over the next four months, reducing their reliance on the higher cost of deposit, allowing them to increase lending,” Nomura analysts said in a note.
5. Technicals
Technically, the Nifty’s undertone has improved and the index is expected to remain constructive as long as it sustains above the 23,300 – 23,350 zone, analyst said.
“A decisive move above 23,500 could accelerate momentum towards 23,700 and higher levels. On the downside, 23,100 remains an important support, while a breach below this level could invite fresh selling pressure towards the 22,900 zone,” said Rajesh Palviya, Head of Research, Axis Direct.
While near-term sentiment has turned positive, investors should remain watchful of developments on the geopolitical front, as any setback in negotiations or a renewed spike in crude prices could reintroduce volatility and cap the market’s upside, he added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.