India’s equity market logged a healthy gain for the second straight session on Wednesday, driven by a decline in crude oil prices and positive cues from Asian markets, as optimism around a potential de-escalation in the West Asia conflict lifted overall sentiment and risk appetite. At close, the Sensex surged 1,205 points or 1.63% to 75,273.45, while the Nifty advanced 394.05 points or 1.72% to settle at 23,306.45.
The two indices had logged similar gains on Tuesday, thus recovering over 4% from the lows of Monday (March 23). Equities and currency have come under severe pressure since the start of March as escalating tensions in West Asia have pushed Brent crude oil and natural gas prices to elevated levels. The rupee weakened by 20 paise to 93.97 against the US dollar on Wednesday due to sustained foreign fund outflows that kept investors cautious.
The fresh recovery in equities comes amid reports that US vice president JD Vance is set to meet Iranian officials in Pakistan. Earlier, President Donald Trump said on Monday that he would order the military to postpone any strikes against Iranian power plants and energy infrastructure for five days.
"Potential diplomatic progress between the US and Iran—despite mixed geopolitical commentary—led to easing crude oil prices below $100, which was welcomed by the market. Early signs of normalisation in maritime movement through the Strait of Hormuz are likely to further support investor confidence, although it may be early to comment,” said Vinod Nair, Head of Research, Geojit Investments.
Nair added that India’s valuation premium, which had remained elevated for some time, has corrected to more reasonable levels, offering investors greater comfort at current market levels.
On the commodity front, crude prices softened, with Brent crude falling 5.2% to around $95 per barrel, after comments from US President Donald Trump indicating that negotiations with Iran are underway and that a potential resolution may be in sight. The easing in oil prices provided additional support to equities by alleviating near-term inflation and supply concerns, said Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services.
He added that despite the rebound, foreign institutional investors remained aggressive sellers, highlighting that underlying global risk aversion has not fully subsided. “Going ahead, the ongoing recovery is likely to remain fragile and contingent on further clarity around geopolitical developments. While easing crude prices and negotiation signals have provided near-term relief, any reversal in sentiment—particularly around energy infrastructure risks—could quickly weigh on markets,” stated Khemka.
Market breadth remained positive on Wednesday with all sectoral indices closing in the green. Broader markets outperform the benchmarks, with the Nifty Midcap index rising 2.3% and the Small Cap index climbing 2.6%.
The escalation in West Asia, 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 Monday.
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.
Ajit Mishra – SVP, Research, Religare Broking, said investor sentiment improved significantly amid reports of potential negotiations between the US and Iran, which helped cool crude oil prices below the $100 mark. However, despite the rebound, the volatility index, India VIX, remained elevated, indicating continued caution amid persistent FII outflows and weakness in the rupee, he added.
