The Indian stock market rallied sharply on Friday, with the Sensex and Nifty gaining 2% each, as hopes of a US-Iran peace deal, easing crude oil prices and improving global sentiment lifted investor confidence.
Sensex surged over 1,695 points to close at 75,527.95, while Nifty 50 jumped over 461 points to end the session at 23,622.90. The rally added around Rs 10 lakh crore to the combined market capitalisation of BSE-listed companies, taking the total market value to around Rs 462 lakh crore.
Bajaj Finance shares rallied 6% to lead gains on the Sensex. L&T and IndiGo shares surged around 5% each, while Titan, Eternal, HDFC Bank, Bajaj Finserv, Axis Bank, Reliance Industries, UltraTech Cement, Bharti Airtel, Kotak Mahindra Bank and Maruti Suzuki shares gained 2-4% each. Tech Mahindra shares, however, dropped over 2% despite market optimism to lead losses.
The rally was broad-based, with the Nifty Midcap 100 and Nifty Smallcap 100 indices advancing more than 2% each. All sectoral indices also posted strong gains across the board except Nifty IT, which closed marginally lower. Nifty Private Bank, Nifty PSU Bank, Nifty Financial and Nifty Realty indices rallied around 3% each.
Meanwhile, India VIX, the market's fear gauge, fell 5% to 14.80, reflecting easing volatility. Market breadth remained firmly positive, with 2,740 stocks advancing on the NSE, compared with 564 declines, while 86 stocks were unchanged.
Here are the key factors boosting markets today:
1) US-Iran peace deal optimism
The much-awaited peace deal between Iran and the US, which is expected to end the month-long conflict and reopen the Strait of Hormuz, could be signed on Sunday in Switzerland, ahead of the G7 summit that begins on Monday, Bloomberg reported. This comes after US President Donald Trump on Thursday said that the US and Iran could sign a peace deal as soon as this weekend, which would reopen the Strait of Hormuz for shipping. Speaking to reporters at the White House, Trump said, "We just made a great settlement of the war with Iran." Notably, Trump celebrates his 80th birthday on Sunday, when the two parties may reportedly sign the deal.
"The strait will officially open as soon as we sign, which could be soon, very soon, maybe over the weekend in Europe,” he further said, adding that Vice President JD Vance could sign on behalf of the United States. When asked if Iran's Supreme Leader Ayatollah Mojtaba Khamenei has approved the deal, Trump said, "I understand the answer is yes."
Iran has countered the claim, saying it had not reached a final decision on an agreement. Iranian media reported Foreign Ministry spokesperson Esmaeil Baghaei as saying that large parts of the negotiating text have been finalized but Iran would not compromise on its red lines.
Meanwhile, Trump called off new military strikes on Iran, claiming a breakthrough in negotiations to end the war. The draft version of the Iran-US memorandum of understanding includes a commitment from the US to lift oil sanctions and a commitment from Iran to reopen the Strait of Hormuz within 30 days, Iranian state media reported on Friday.
2) Oil prices tumble below $90
Oil prices plunged below $90 per barrel as a result of the rising hopes for a sooner conclusion to the Iran-US peace deal and subsequent opening of the Strait of Hormuz, a narrow 33-kilometre waterway connecting the Persian Gulf with the Gulf of Oman that handles over 20% of the world’s daily oil and gas shipments.
Brent crude futures dropped 4% to trade below $87 per barrel while WTI Crude futures dropped over 4% to $83 per barrel. Notably, this comes after a skyrocketing rally had pushed oil prices as high as above $120 per barrel earlier this year following the closure of the Strait, rattling global markets.
3) Global markets rally
Dalal Street accompanied its global peers in gains amid optimism around falling oil prices and the sooner conclusion of a peace deal. Japan’s Nikkei surged 3%, while South Korea’s Kospi rallied over 4%. Hong Kong’s Hang Seng and China’s Shanghai Composite jumped around 1-2%, while Taiwan Weighted surged over 2%.
Wall Street also closed sharply higher yesterday, with the tech-heavy Nasdaq jumping around 3% and the S&P 500 gaining nearly 2%. European markets, meanwhile, are trading up to 2% higher.
4) Rupee rises
Indian rupee gained 72 paise to 95.13 against the US dollar. “Going ahead, crude oil movement will remain the key driver for the currency, along with capital flows and global risk sentiment. The near-term rupee range is seen between 95.25–95.95,” said Jateen Trivedi, VP, Research Analyst – Commodity and Currency, at LKP Securities.
What lies ahead?
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, said Rajesh Palviya, Head of Research at Axis Direct.
“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. 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,” he added.
Today’s sharp rise comes after Sensex and Nifty saw muted gains and losses for a couple of sessions, despite sharp upswings and downswings. SBI Securities had said that a decisive breach by Nifty below the 23,000 mark could intensify selling pressure, potentially dragging the index towards 22,850, followed by 22,700 levels in the short term. On the upside, the immediate resistance was placed in the 23,300–23,330 zone, which is likely to act as a near-term hurdle for any recovery, although the index has now comfortably breached that level.
“Keeping up with his ludicrous inconsistency, President Trump backed off from his threat to ‘hit Iran very hard tonight’ and declared that ‘we are close to a great settlement to end the war’.
How the agreement will pan out remains to be seen. But the good news is that Brent is sharply down to $89 with potential for more downside if the agreement becomes real,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
“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. Bank Nifty has the potential to outperform,” he added, advising investors to watch out for stocks that will gain from crude decline like paints, tyres and adhesives.
(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
