Indian markets staged a relief rally on Wednesday after US President Donald Trump indicated that the war in West Asia could end in the next two weeks.
Benchmark indices responded positively with BSE Sensex and Nifty 50 rising by 1,187 points (1.65%) and 348 points (1.56%) respectively during the day. The positive sentiment was observed across the market as 24 out of the 25 sectors ended in green for the day with BSE Services and BSE PSU Bank sectors leading the charts with gains of 4.99% and 3.66%, respectively.
Broad-Based Recovery
The broader markets also fared much better, with mid and small cap indices also showed significant gains, rising by 956 points (2.36%) and 1,744 points (4.03%), respectively.
The overall breadth of the market was positive as 3,828 stocks gained during the day, significantly outnumbering the 508 stocks that lagged. The market rally led to an increase in investor wealth by Rs 9.60 lakh crore after two consecutive trading sessions where investor wealth reduced by over Rs 8.5 lakh crore. The rise was despite FII/FPIs being net sellers, selling Rs 8,331 crore during the day while domestic institutional investors (DIIs) were net buyers, buying Rs 7,172 crore.
Expert Verdict
As the market looks forward to the end of the war in West Asia and a new financial year, experts still ask investors to maintain caution. Shripal Shah, MD & CEO of Kotak Securities said that while the long-term outlook on the market remains bullish, the near-term outlook is still cautious. He believes that it makes sense to wait for clear signs of the conflict easing before turning constructive. He asks investors to not try to catch the bottom and rather stagger their investments with more meaningful deployment once markets stabilize and the next upcycle becomes visible.
Sanjeeb Hota, head of equity strategy at Standard Chartered Securities India said that if the war comes to an end in the next couple of weeks, the impact on the market could be limited to earnings cut in Q4FY26 and Q1FY27. As the market has already corrected significantly from the peak and is pricing in a worse-case scenario of a prolonged war, an end to the war as indicated by Trump would lead to some stability in crude oil prices and the market will start pricing in an upside.
He finds valuations to be turning very favourable in the overall market. “If you look beyond Nifty 50, valuations are constructive and risk-reward is favourable, though some pockets may continue to witness valuation froth or premium,” he adds.
(Inputs from Anjana Therese Antony)