Sensex jumps 1,200 points as US-Iran deal lifts markets: Is the worst over for investors?

Markets surged after the US and Iran signalled a deal to end hostilities and restore Strait of Hormuz shipping. The rebound tracked falling crude prices, though analysts said investors should remain cautious.

In Short

• US-Iran deal and crude price fall sparked broad market rally
• Crude oil prices fell over 4%, easing inflation worries
• Experts advise caution despite positive market sentiment

Stock markets witnessed a sharp rally on Monday, with the Sensex and the Nifty gaining nearly 2%, as a breakthrough in the US-Iran conflict and a sharp decline in crude oil prices sparked a broad-based buying spree on Dalal Street.

The S&P BSE Sensex surged 1,213.79 points, or 1.61%, to 76,741.74, while the NSE Nifty50 climbed 360.40 points, or 1.53%, to 23,983.30 in early trade.

The rally was widespread, with almost all Sensex stocks trading in the green, while banking, realty, auto and consumption stocks emerged as the biggest winners.

But the bigger question for investors is whether this marks the end of the recent market turmoil or whether caution is still warranted.

CRUDE OIL IS NO LONGER THE BIGGEST WORRY

The biggest trigger behind the rally was the dramatic fall in crude oil prices after the US and Iran announced that they had reached an initial agreement to end hostilities and restore shipping through the Strait of Hormuz.

Brent crude fell 4.39% to $83.50 per barrel, while US WTI crude dropped 4.84% to $80.77 per barrel.

For India, a country that imports more than 85% of its crude oil needs, lower oil prices are a major relief. A fall in crude eases inflation concerns, reduces pressure on the rupee, lowers the import bill and improves the country's current account position.

Kranthi Bathini, Equity Strategist at WealthMills Securities, said the decline in crude oil prices has significantly improved the outlook for Indian markets.

"The crude oil decisively coming to the range of $80 is a big booster and positive for the economy and markets. That is the reason we can see such euphoria in Indian stock markets at this point of time," he said.

He added that India is among the biggest beneficiaries of lower crude prices and many concerns that had weighed on markets in the past few months are now easing.

BANKS, AUTO, REALTY LEAD THE MARKET RALLY

The relief rally was visible across sectors, with domestic-focused companies seeing the strongest buying.

Nifty Realty was the top sectoral gainer, rising 3.62%, followed by Nifty Mid Small Financial Services ex-Bank, which gained 3.33%. Nifty Auto jumped 2.85%, Nifty Metal rose 2.63%, Nifty Consumer Durables advanced 2.64%, while Nifty Financial Services climbed 2.19%.

Banking stocks also participated strongly, with Nifty Private Bank gaining 1.17% and Nifty PSU Bank rising 1.37%.

Among Sensex stocks, IndiGo was the biggest gainer, rising 4.82%. Eternal gained 4.39%, Bajaj Finance climbed 4.28%, Bajaj Finserv rose 4.07%, Maruti advanced 3.96%, and Larsen & Toubro jumped 3.75%.

Other major gainers included M&M, which rose 3.11%, HDFC Bank, up 1.95%, Reliance Industries, which gained 1.54%, and Infosys, which added 1.44%.

Sun Pharma was among the few stocks trading in the red, slipping 0.12%, while NTPC declined 0.41%.

The rally was not limited to blue-chip companies. The broader market also participated strongly, with the Nifty Midcap 50 and Nifty Midcap 100 gaining 1.59% each, while the Nifty Smallcap 100 climbed 1.79%.

CAN INVESTORS NOW BREATHE A SIGH OF RELIEF?

The sharp rebound suggests that the immediate fear of a prolonged conflict in West Asia and a spike in crude prices above $100 has reduced. Lower crude prices could support India's growth outlook, ease inflationary pressure and improve market sentiment.

However, experts warn that it is still too early to declare a complete victory.

Manoranjan Sharma, Chief Economist at Infomerics Ratings, urged investors to remain cautious.

"Given Trump's notoriously unpredictable conduct, the aggression by Israel and the matching retaliation by Iran, this could be premature. It may not yet be done and dusted. Let's not count the chickens before they are hatched," he said.

Sharma noted that the real test will be whether the agreement holds and whether both sides follow through on their commitments.

The coming days will determine whether this rally has enough strength to sustain. Investors will closely monitor the formal signing of the US-Iran agreement, developments around the Strait of Hormuz, movement in crude oil prices and foreign investor activity.

For now, the panic that gripped markets during the height of the West Asia conflict has eased. But while the storm appears to be passing, investors may still need to keep their umbrellas ready.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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