India’s equity market surged sharply on Tuesday after witnessing a heavy sell-off on Monday. The positive momentum mirrored the rally in global markets amid signs of de-escalation in West Asia after US President Donald Trump on Monday said that he would order the military to postpone any strikes against Iranian power plants and energy infrastructure for five days.
The BSE Sensex closed the Tuesday session at 74,068.45, up 1372.06 points or 1.89%, while the NSE Nifty50 settled at 22,912.40, up 400 points or 1.78%. The broader markets also mirrored the benchmark performance, with Nifty Midcap and Small cap indices outperforming, rising by 2.60% and 2.63% respectively, driven by widespread buying across stocks.
"The domestic market witnessed a relief rally following a temporary pause in attacks on Iran’s energy infrastructure, which could lead to further leeway in easing West Asia–related tensions. However, caution persists as investors await greater clarity on the developments around the Strait of Hormuz,” said Vinod Nair, Head of Research, Geojit Investments.
Nair added that the resulting supply chain issues are unlikely to have a lasting impact on markets and may be limited to a one- to two-quarter disruption in earnings.
The Sensex and Nifty had plunged up to 2.6% on Monday amid geopolitical tensions turning for the worse during the weekend as US President Donald Trump issued a stark ultimatum, warning of strikes on Iran’s power grid unless Tehran restores access to the Strait of Hormuz. Iran retaliated with threats to target critical infrastructure throughout West Asia if the US attacks its power plants.
The escalating conflict, now in its fourth week, has crippled shipments via the Strait of Hormuz, a chokepoint funnelling about 20% of global oil supply, 40% of India’s oil import and a third of the liquefied natural gas trade. This has led to a sharp surge in crude oil and gas prices, with Brent crude prices trading between $110-115 a barrel. On Tuesday, Brent crude prices hovered above the $100 mark.
Higher oil prices are likely to translate into higher inflation in the coming months, exerting pressure on currency stability and corporate margins, thereby impacting overall equity market sentiment. Meanwhile, the rupee clawed back slightly, gaining 10 paise to end around 93.87/$ after Monday's record low near 94, underpinned by a double-digit drop in crude price from Monday’s high.