MUMBAI: India’s equity market cheered the two-week ceasefire in West Asia and the reopening of the Strait of Hormuz as benchmark indices- the BSE Sensex and the NSE Nifty50- sprinted almost 4% in early trade deals. The Sensex surged 2,800 points, or 4%, to an intraday high of 77,456, while the Nifty50 jumped over 800 points, or 3.7%, to the day's high of 23,961.
The relief rally came after US President Donald Trump said that Washington would suspend military actions against Iran for two weeks and Iran accepted the ceasefire plan. This marked a pause to the ongoing conflict which began on February 28 after US and Israeli forces launched an attack on Tehran.
Moreover, Iran’s conditional reopening of the Strait of Hormuz triggered a sharp crash in Brent crude prices, down over 14% to around $95 per barrel, which is a major tailwind for equities. For import-dependent economies like India, lower crude prices should boost the growth outlook, shore up the rupee, and attract fresh foreign capital inflows amid easing inflation pressures.
"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," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
The RBI’s decision to maintain the repo rate at 5.25% in its latest MPC meeting is also welcomed by the street. “The decision was largely in line with expectations. From here, the RBI is likely to continue with a data-dependent approach, suggesting an extended pause in rates. The broader policy stance is also likely to remain neutral, although liquidity conditions may continue to be managed in an accommodative manner. Overall, this policy mix appears neutral to marginally supportive for equities, fixed income and the foreign exchange market,” said Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group.
The volatility index India VIX fell by more than 19% to fall below the 20 level in early deals, reflecting easing market tensions. Midcap and smallcap indices also surged by around 4% in early trade, reflecting a broad-based rally.