Sensex jumps 639 pts, Nifty ends above 24,050 to snap 3-day losing run. What drove the rally?

Indian markets snapped a three-session losing streak on Monday, with Sensex and Nifty rising over 0.8% each after reports that Iran has sent a peace proposal to the US, aimed at easing the ongoing Middle East conflict, among other factors, lifted investor sentiment.

Sensex gained over 639 points to close at 77,304, while Nifty rose around 195 points to end the session at 24,093. The sharp gains recorded today added nearly Rs 7 lakh crore to the total market capitalisation of all companies listed on BSE, pulling it up to Rs 468 lakh crore.

Sun Pharma shares rallied around 7% to emerge as the top gainers on Sensex, after the pharma giant announced the $12 billion acquisition of US-based Organon. Reliance Industries (RIL) shares followed, erasing all morning losses to jump 3% after its Q4 earnings.


Adani Ports, NTPC, Tech Mahindra, TCS, HCLTech, Mahindra & Mahindra (M&M) and others meanwhile gained 2-3%. Bucking the trend, Axis Bank shares dropped around 3% after the private lender’s Q4 results failed to impress Dalal Street.

Broader markets continued to outperform benchmarks, with the Nifty Smallcap 100 index jumping nearly 2% and the Nifty Midcap 100 index rising around 1.5%. This came as India VIX, which measures volatility in markets, tumbled around 7% to 18.37.

Sectorally, the Nifty Pharma index jumped nearly 3% to lead gains, as heavyweight Sun Pharma shares rallied and lifted investor sentiment. Nifty Consumer Durables and Nifty Realty indices gained over 2% each. Around 2,550 stocks advanced on NSE, while 801 declined and 98 remained unchanged.

In the current state of total uncertainty, investors can wait and watch the geopolitical developments and take decisions as clarity emerges, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. “Despite the macro threats emerging from the energy crisis, India’s growth momentum is showing resilience and optimism as indicated by the recent rising private capex numbers,” he added.

Despite prevailing caution, markets rebounded today. Here are the key factors driving the renewed optimism.

1) Iran sends peace proposal to US

Iran reportedly gave the United States a new proposal on reopening of the Strait of Hormuz and ending of the war, with nuclear negotiations postponed for a later stage. Citing US officials and two sources, Axios reported that Iranian foreign minister Araghchi made it clear to the Pakistani, Egyptian, Turkish and Qatari mediators over the weekend that there is no consensus inside the Iranian leadership about how to address the US demands.

The new proposal, given to the US via the Pakistani mediators, focuses on solving the crisis over the strait and the US blockade first. As part of that, the ceasefire would be extended for a long period or the parties would agree on a permanent end to the war. According to the proposal, the nuclear negotiations would only start at a later stage, after the strait was open and the blockade lifted. The White House has received the proposal but it's unclear whether the US is willing to explore it.

Meanwhile, Pakistan is attempting to bridge the gaps between Iran and the US, and bring them back to the negotiation table, Reuters reported, citing people familiar with the matter. This comes as US President Donald Trump cancelled his envoys’ trip to Islamabad.

2) Global markets rally

Asian markets mostly traded in the green on Monday, with Japan’s Nikkei and South Korea’s Kospi gaining around 2% each to hit fresh record highs. Hong Kong’s Hang Seng and China’s Shanghai Composite closed with marginal gains and losses.

Wall Street indices closed in the deep green on Friday. European markets, meanwhile, moved into the green on Monday, with France’s CAC and Germany’s DAX rising over 0.5% and the UK’s FTSE gaining 0.1% in the afternoon.

3) Dip buying sparks rebound

After three sessions of sharp decline along with incessant selloff in March, markets may be witnessing some short-covering and value-buying. The Nifty declined by around 3% over the past three sessions, erasing some of the gains made during its rebound wave earlier this month, following an 11% crash in March as the war in the Middle East rattled global markets.

Nifty is still more than 4% lower than its pre-Middle East war levels of near 25,200. Narendra Solanki from Anand Rathi Shares & Stock Brokers highlighted that Nifty has recovered over 2,000 points from the 22,000 range it was trading in March. “The market has recovered smartly and we just entered with that kind of recovery into the result seasons, and the markets were hoping for the result season to be largely in line,” he told ET Now.

4) Rupee recovery

Indian rupee rose 0.06% to close at 94.19 on Monday against the US dollar as dollar sales by ⁠state-run banks cushioned the pressure from higher oil prices on the currency after the US-Iran talks stalled. This came after the Indian currency recorded a sharp decline earlier in the morning and in the previous sessions.

“Rupee traded marginally stronger, as markets reacted to early signs of de-escalation in the US–Iran conflict, with proposals around reopening the Strait of Hormuz and extending the ceasefire supporting sentiment,” said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

“The recovery remains cautious, as clarity is still evolving and markets continue to price in both escalation and resolution scenarios. Going ahead, rupee direction will largely depend on US dollar movement and FII flows, while the upcoming Fed policy decision will be a key trigger for global currency trends. In the near term, rupee is expected to trade in a range of 93.75–94.50, with volatility likely to remain elevated,” he added.

Bears still hiding behind the bulls?

Despite the renewed optimism, some caution is warranted. Oil prices remained elevated, with Brent crude futures rising more than 2% to trade at $ 108 per barrel on Monday afternoon. After comfortably falling below the $100 per barrel mark earlier this month, oil prices soared back above the crucial level last week as fresh attacks near the Strait of Hormuz spooked investors about supply concerns.

Foreign investors remained net sellers of Indian equities on Friday, net selling shares worth around Rs 8,828 crore, according to provisional data on NSE. While this does not reflect their behaviour today, strong FII selling typically dampens sentiment.

(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)