The Indian equity market saw a smart rally in Tuesday’s trade. The Nifty 50 and 30-stock Sensex surged almost 2% each during the trade. Also, the broader indices rallied and outperformed the main indices. The Nifty 50 closed the session 399.75 points or 1.78% higher at 22,912.40, while the BSE Sensex jumped 1,372 points or 1.89% to settle at 74,068.
The big gainers in trade today
The rally was led by the automobile and banking majors like IDFC First Bank, Kotak Mahindra Bank, UNO Minda, etc. Further, aided by IT and metal stocks. The heavyweight HDFC Bank was the highest mover, contributing 95 points alone, while Larsen & Toubro was the biggest gainer of the Nifty 50, rising over 5%. InterGlobe Aviation, Eternal, Asian Paints, and Bajaj Finance were the top gainers in the Nifty 50.
It is to be noted that none of the sectoral indices was trading in the red. Apart from that, the volatility index, India VIX, fell 6.67% in today’s trade. The overall breadth was in favour of bulls. Out of 3,332 traded stocks, 2,490 stocks were in the green, while a mere 758 stocks were in the red.
3 reasons why the market is rallying today
There are many catalysts that could potentially lead the markets higher. According to VK Vijayakumar, Chief Investment Strategist of Geojit Investments, “President Trump signalled a 5-day halt to attacks on Iran and talked about ‘productive’ talks with the Iranian leadership. Immediately, Iran’s foreign ministry denied this.”
Later, they acknowledged that there are attempts to ‘get diplomacy going’ through the mediation of some countries.
Brent crude crashed by 10% to $100 levels on news of positive initiatives to end the hostilities. The market, it appears, is factoring in an end to the war as reflected in the August US oil futures trading at $80. However, in the near-term, there will be excessive volatility in response to news regarding the war and events on the war front, he added.
Here is a quick look at the 3 main reasons why the market is rallying-
US announces war pause
On Monday, the United States and Iran announced a pause in strikes on each other. US President Donald Trump said a five-day pause on planned strikes against Iran’s power and energy infrastructure, easing geopolitical turmoil.
However, Iran denied any talks of negotiations and confirmed new attacks, and Israel maintained strikes on Tehran as the US announced a five-day pause.
“I am please to report that the United States of America, and the country of Iran, have had, over the the last two days, very good and productive conversations regarding a complete and total resolution of our hostilities in the Middle East (West Asia),” said Trump in a post on the social media platform Truth Social.
Drop crude oil prices
The price of Brent Crude fell by more than 11% on Monday after Trump announced the pause. Multi Commodity Exchange of India crude fell 9% to Rs 8,425, and WTI crude declined over 10% to near $88.5 per barrel on Monday. However, the commodity saw some gains on Tuesday’s trade.
“The sell-off followed US President Donald Trump’s decision to pause planned strikes on Iranian energy infrastructure for five days after reported constructive talks. This move temporarily eased fears of supply disruptions linked to the Strait of Hormuz, a key global oil transit route,” said Ajay Kedia, Founder of Kedia Commodity Advisors.
Stable US markets
Overnight, the stocks on Wall Street rallied. The Dow Jones Industrial Average jumped 631 points, or 1.38%, to settle at 46,208.47. The S&P 500 surged 1.15% and closed at 6,581.00, while the Nasdaq Composite rose 1.38% and ended at 21,946.76.