Indian equities snapped their three-day losing streak despite ongoing hostilities between the US-Israel coalition and Iran, and rising crude prices. The recovery is supported by value buying at lower levels and a rally in global markets after three sessions of intense selling, said analysts.
The US announcement of providing security to cargo ships and oil tankers passing the important Strait of Hormuz and reports suggesting a possible resolution to the ongoing conflict also lifted sentiments even as both sides continue to exchange missiles on Thursday.
The BSE Sensex rose 899.71 points, or 1.14%, to settle at 80,015.90, while the NSE Nifty advanced 285.40 points, or 1.17%, to end at 24,765.90. Investor sentiment strengthened as the India VIX declined nearly 15%, signalling easing volatility and a renewed appetite for risk among market participants.
Siddhartha Khemka, Head of Research, Wealth Management, Motilal Oswal Financial Services, said that sentiment received a boost after the US announced security and insurance guarantees for commercial shipping through the Strait of Hormuz, including the possibility of military escorts for oil tankers to ensure uninterrupted global energy supplies amid tensions with Iran.
“The move helped ease concerns over potential disruptions to global oil flows and provided some relief to markets. Additional support came from reports suggesting that Iran may be exploring possible terms to end the conflict with the United States and Israel, raising hopes of a potential de-escalation, although officials remain cautious and regional tensions persist,” added Khemka.
The US and Israel continued to bombard Iran on Thursday, killing at least 1,230 people since the conflict began on Saturday. Iran has also launched a fresh wave of missile and drone attacks against Israel and US assets in the Middle East.
The recovery in the market came despite rising crude oil prices. Brent crude soared nearly 4% on Thursday to hit a high of $84.63. Since the West Asia crisis that began on Saturday, crude prices have shot up more than 15%. Given that India is a key importer of oil, higher crude prices are a key macro headwind for the country. This may exert pressure on inflation, currency stability and corporate margins, thereby impacting overall equity market sentiment.
Hitesh Tailor, Technical Research Analyst at Choice Broking, said, "Despite the surge in crude oil prices and persistent geopolitical tensions in West Asia, today’s market rebound appears largely driven by technical and derivative factors. After the recent sharp correction, benchmark indices had slipped into deeply oversold territory, prompting a relief rally. The cooling in volatility, with India VIX easing from elevated levels, suggests that a significant portion of the geopolitical risk premium had already been priced in during the earlier decline.”
Vinod Nair, Head of Research, Geojit Investments, said that investor sentiment improved after comments from the US deputy secretary suggested that an India–US trade deal may be nearing completion. He added that value buying also emerged in sectors such as metals, consumer durables, realty, and auto following recent corrections, while IT stocks resumed their decline partly due to the strengthening of the Indian rupee. Market momentum strengthened toward the close after reports that Iran had conditionally offered to abandon its nuclear program, raising hopes of de-escalation, stated Nair.
Tensions in West Asia escalated after US and Israeli forces targeted key Iranian sites over the weekend, resulting in the death of Supreme Leader Ayatollah Ali Khamenei. Iran swiftly responded with a barrage of ballistic missiles aimed at Israeli cities and important Middle East hubs such as Dubai, Kuwait and Bahrain.