Sensex jumps 1,100 points: Why is stock market rising today?

Stock markets rallied sharply in early trade on Monday as cooling crude oil prices, a stronger rupee and hopes of easing tensions between the US and Iran boosted investor confidence and triggered broad-based buying across sectors.

The benchmark BSE Sensex surged 892.05 points, or 1.18%, to 76,307.40 around 9:24 am, while the NSE Nifty50 climbed 259.50 points, or 1.09%, to 23,978.80, moving close to the important 24,000 mark.

The rally came after crude oil prices dropped below the $100-per-barrel level for the first time in more than two weeks, easing concerns around inflation, fuel prices and pressure on the economy.

FALLING CRUDE OIL BIGGEST TRIGGER

The biggest trigger behind Monday’s sharp rally was the steep fall in global crude oil prices.

Brent crude futures fell 5.58% to $97.76 per barrel, while WTI crude declined 5.85% to $98 per barrel as of 9:30 am.

Oil prices slipped after hopes emerged that the US and Iran could be moving closer to an agreement that may ease tensions in West Asia and reopen the Strait of Hormuz, a key global oil shipping route.

The Strait of Hormuz is extremely important because nearly one-fifth of global oil and LNG shipments pass through it. Any disruption there usually pushes oil prices sharply higher and creates inflation concerns across the world.

For India, falling crude oil prices are a major relief because the country imports nearly 90% of its crude oil needs.

Lower oil prices reduce:

• inflation pressure,
• fuel import costs,
• government subsidy concerns,
• and fears of interest rate hikes.

This improves overall market sentiment and supports sectors such as banking, auto, aviation and consumption.

WHY MARKETS ARE RISING

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the sharp fall in crude oil prices could become a turning point for markets if tensions continue easing.

“We are starting the week on a positive note. Crude has dipped by $5 to below $100 on expectations that US and Iran are close to a deal. The market will wait and watch for clarity and certainty since many similar expectations have been belied since the start of the war. If this expected deal holds and crude drifts down, that can turn out to be turning point for the market,” he said.

He also highlighted that stronger-than-expected March quarter earnings have helped improve investor confidence.

“Another positive trend is the better-than-expected Q4 results. An important trend to note is the impressive growth of most digital platform companies. The market has been rewarding performance,” Vijayakumar added.

RUPEE RECOVERY BOOSTS SENTIMENT

Another major positive development for markets was the sharp recovery in the Indian rupee.

The rupee opened 0.37% stronger at 95.34 against the US dollar compared to its previous close of 95.69.

The currency had recently fallen to record lows near 97 per dollar amid elevated crude oil prices and fears around the Iran conflict.

A stronger rupee is positive for markets because it reduces imported inflation and improves foreign investor confidence.

According to Vijayakumar, currency stability will be important for bringing foreign investors back into Indian equities.

“The appreciation in the rupee from the recent low of 96.96 is a welcome trend. Stability in the currency is necessary to bring back the FPIs who have been on a sustained sell mode. The resilience of the market during this period of crisis is a hugely positive factor. This is a reflection of partly the economy’s strength, and partly the confidence of Indian investors,” he said.

BANKING, AUTO AND AVIATION STOCKS LEAD RALLY

The rally was broad-based, with most major sectors trading firmly in the green.

Nifty Auto emerged as the top-performing sector, rising 2.31%, as lower crude oil prices improve outlook for automobile companies and reduce inflation worries.

Financial stocks also saw strong buying:
Nifty PSU Bank rose 1.63%, Nifty Private Bank gained 1.56%, while Nifty Financial Services climbed 1.54%.

Realty and oil & gas stocks also traded higher.

Among Sensex gainers, Mahindra & Mahindra surged 2.33%, HDFC Bank rose 2.11%, Bajaj Finance climbed 2.01%, while Larsen & Toubro gained 1.79%.

InterGlobe Aviation, which operates IndiGo, rose 1.72% as lower aviation turbine fuel costs are seen benefiting airline companies.

Bajaj Finserv, SBI, ICICI Bank, Maruti Suzuki and Axis Bank were also among the major gainers.

Only a few stocks traded lower, including TCS, Infosys, Tech Mahindra and Sun Pharma.

BROADER MARKETS ALSO SEE STRONG BUYING

The positive mood was visible across the broader market as well.

The Nifty Midcap100 index gained 0.77%, while the Nifty Smallcap100 index rose 1.13%, showing that investors were buying across segments and not just large-cap stocks.

India VIX, often called the market’s fear gauge, fell sharply by 5.22% to 16.98, indicating easing volatility and improving confidence among traders.

Despite the strong rally, analysts say markets will continue to remain sensitive to developments around the Iran conflict and movement in crude oil prices.

Over the past few months, the Iran war has heavily impacted global markets, pushing oil prices higher and increasing inflation concerns worldwide.

Foreign institutional investors (FIIs) have also been heavy sellers in Indian equities during this period due to rising oil prices, rupee weakness and global uncertainty.

Market experts believe that if crude oil prices continue to remain below $100 and geopolitical tensions ease further, investor sentiment could improve significantly in the coming sessions.

However, any fresh escalation in West Asia could again increase volatility in equities, oil and currency markets.

(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.)