What’s Driving the Stock Market Surge? Insights from Mumbai's Latest Rally
Mumbai's Stock Market Soars Amid Global Optimism
Mumbai: The equity market benchmarks, Sensex and Nifty, experienced a remarkable increase of nearly 4% on Wednesday, buoyed by a robust rally in global markets and a decline in crude oil prices following a two-week ceasefire agreement between the US and Iran.
Continuing its upward trend for the fifth consecutive day, the 30-share BSE Sensex surged by 2,946.32 points, or 3.95%, closing at 77,562.90. At its peak during the day, it reached 77,635.54, marking a 4% increase.
The 50-share NSE Nifty also saw significant gains, climbing 873.70 points, or 3.78%, to finish at 23,997.35, with an intra-day high of 24,025.15, reflecting a 3.89% rise.
Among the Sensex constituents, InterGlobe Aviation led the charge with an impressive 8.22% increase. Other notable gainers included Larsen & Toubro, Bajaj Finance, Mahindra & Mahindra, Axis Bank, and Maruti.
Conversely, Tech Mahindra, Sun Pharma, and Power Grid were among the few stocks that faced declines.
Brent crude, the global oil benchmark, saw a significant drop of 13.89%, settling at USD 94.09 per barrel.
Asian markets also reflected this positive trend, with South Korea's Kospi soaring by 6.87% and Japan's Nikkei 225 climbing 5.39%. Both Shanghai's SSE Composite index and Hong Kong's Hang Seng index reported substantial gains.
European markets were also trading significantly higher.
In the US, markets closed relatively flat on Tuesday.
Ponmudi R, CEO of Enrich Money, noted, "The ceasefire announcement has significantly alleviated fears and reduced risk-off sentiment, as evidenced by a more than 20% drop in India's volatility index, indicating a swift reduction in uncertainty. This optimistic sentiment was echoed across global markets, with indices in the US, Europe, and Asia showing a broad-based recovery, reinforcing the strength of the current rally."
He added that energy markets reacted sharply to the ceasefire news.
"With Iran indicating the potential for safe passage through the Strait of Hormuz during this two-week period, Brent crude prices corrected sharply towards the USD 92 mark," Ponmudi explained.
Meanwhile, the Reserve Bank of India opted to maintain its key policy rate on Wednesday, taking a cautious approach as it evaluated the implications of the six-week conflict in Iran on energy supplies, inflation, and economic growth.
The central bank's Monetary Policy Committee unanimously decided to keep the benchmark repurchase rate at 5.25%, citing increased uncertainty following the West Asia conflict, which had driven crude prices up, weakened the rupee, and disrupted trade flows.
According to exchange data, Foreign Institutional Investors (FIIs) sold equities worth Rs 8,692.11 crore on Tuesday, while Domestic Institutional Investors (DIIs) purchased stocks valued at Rs 7,979.50 crore.
Vinod Nair, Head of Research at Geojit Investments Limited, remarked, "The interim ceasefire is viewed as a step towards greater regional stability. India stands to gain from the reopening of the Hormuz Strait, which has pushed oil prices below USD 100 and mitigated downside risks to FY27 EPS growth."
The notable improvement in market sentiment has led to a significant decline in the 10-year bond yield and a strengthening of the rupee, with the RBI's decision to maintain the status quo further supporting financials.
On Tuesday, the Sensex had already risen by 509.73 points, or 0.69%, closing at 74,616.58, while the Nifty increased by 155.40 points, or 0.68%, to finish at 23,123.65.