The Indian equity market recorded significant gains on Wednesday, with the benchmarks – BSE Sensex and NSE Nifty50 – closing higher by 1% each amid expectations that geopolitical tensions in West Asia are likely to ease following remarks by US President Donald Trump and US Secretary of State Marco Rubio.
While Rubio stated that "Operation Epic Fury" had concluded after 68 days, Trump declared a brief halt to the US military's "Project Freedom" mission aimed at reopening the Strait of Hormuz, citing "great progress" in negotiations toward a possible deal with Iran.
Following their statement which revived hopes of a US-Iran peace deal, oil prices eased and global equity market, led by Korea’s Kospi (up 6%), surged sharply, boosting investors’ sentiment. Brent crude oil prices fell about 12% to hit a low of $96.74 per barrel. At close, the Sensex surged 940.73 points (1.22%) to settle at 77,958.52, while the Nifty gained 298.15 points (1.24%) to end at 24,330.95.
The broader markets also remained strong, with the Nifty Midcap index rising 1.76% and the Small Cap index advancing 1.93%, indicating sustained buying interest across the broader space. Investors' wealth surged by about Rs 6 lakh crore as the overall market capitalisation of BSE-listed firms jumped to Rs 473 lakh crore from below Rs 467 lakh crore in the previous session.
“Diplomatic signals emerging from the West Asia conflict have turned increasingly constructive, amid reports that the US and Iran are close to agreeing on a one-page memorandum aimed at ending the war, thereby improving global risk sentiment. If negotiations sustain momentum, the prolonged consolidation phase in the Nifty could begin transitioning into a more durable market re-rating,” said Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services. He added that supportive domestic macros and a steady Q4FY26 earnings season continue to underpin broader sentiment.
The rupee, which had weakened to a record low of 95.5/USD amid elevated crude prices and FII outflows, emerged as one of the immediate beneficiaries, appreciating 0.75% to 94.4/USD during the session. Khemka stated that combined with the improving geopolitical backdrop, policy support and macro tailwinds are, for the first time in several months, beginning to align in favour of risk assets.
Among the sectoral stocks, airline shares surged sharply on Tuesday. Interglobe Aviation (IndiGo) jumped nearly 7% and was the top gainer in the Nifty50 pack while SpiceJet hit the upper circuit of 5%. The rally came as the Union Cabinet approved ECLGS 5.0, a Rs 18,100 crore government-backed guarantee scheme aimed at facilitating nearly Rs 2.55 lakh crore in incremental credit flow for businesses facing West Asia-linked liquidity stress, including a dedicated Rs 5,000 crore window for the aviation sector.
“Domestic markets rallied on a risk-on sentiment, driven by easing US–Iran tensions and China’s diplomatic engagement, which helped contain crude prices, though the trend remains headline-sensitive. Global cues were further strengthened by strong AI-led tech earnings, while yen-led dollar weakness aided EM flows. Domestically, favourable political cues, improving infra executions, and ECLGS 5.0 approval remain supportive, especially for MSME sectors,” said Vinod Nair, Head of Research, Geojit Investments.
He added, “However, gains across financials, pharma, auto, and realty were partly led by short covering and tactical moves. With input cost pressures and FX risks still present, a selective investment approach is advisable.”