Sensex, Nifty gain despite fresh US-Iran escalation. Here's why markets are rising today
Sensex rose 500 points, while Nifty also gained. The positive move surprised many investors because geopolitical tensions usually trigger a selloff in risk assets.
Stock markets traded higher on Wednesday despite renewed hostilities in West Asia after the United States launched fresh strikes on Iran, a development that had initially raised fears of a wider regional conflict.
The BSE Sensex climbed 486.11 points, or 0.66%, to 74,404.87 in early trade, while the NSE Nifty50 gained 133.45 points, or 0.57%, to 23,375.55.
The positive move surprised many investors because geopolitical tensions usually trigger a selloff in risk assets. However, Dalal Street chose to focus on a few supportive factors, particularly stable crude oil prices, strength in defensive stocks and hopes that the conflict would remain contained.
CRUDE OIL HAS NOT SPIKED DESPITE THE CONFLICT
For markets, the biggest risk from any conflict in West Asia is a sharp rise in crude oil prices.
India imports around 85% of its crude oil requirements. A sustained increase in oil prices can worsen inflation, put pressure on the rupee and impact economic growth.
However, despite fresh attacks, crude prices remained relatively calm. Brent crude rose only 0.67% to $92.06 per barrel, while WTI crude gained 0.60% to $88.73 per barrel.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, said the market is treating the latest escalation as a one-off event.
"The market is likely to largely ignore the escalation of the conflict in West Asia as a one off. The softness in crude price indicates that. Despite the escalation, Brent crude continues to trade below $93 level," he said.
This has helped investors avoid panic selling.
FMCG AND LARGE-CAP STOCKS PROVIDE SUPPORT
The rally was largely driven by defensive FMCG stocks and heavyweight companies.
Nifty FMCG was the best-performing sector, rising 1.52%.
Hindustan Unilever was the top Sensex gainer, climbing 2.36%. Reliance Industries rose 1.90%, Kotak Mahindra Bank gained 1.28%, Trent added 1.16%, and Asian Paints advanced 1%.
Other major gainers included TCS, State Bank of India, ICICI Bank and Infosys.
On the other hand, some stocks remained under pressure. Eternal and NTPC fell 0.69% each, Tata Steel declined 0.27%, Tech Mahindra slipped 0.38%, and Bharti Airtel lost 0.39%.
The strength in heavyweight stocks helped lift the benchmark indices despite weakness in some sectors.
MARKETS HAVE ALREADY FACTORED IN GEOPOLITICAL RISKS
Another reason behind the resilience is that investors believe the latest escalation may not turn into a prolonged disruption.
Markets generally react strongly only when geopolitical events threaten global supply chains or trigger a sustained rise in commodity prices.
Since oil prices have remained below the crucial $100-per-barrel mark, investors have avoided aggressive selling.
INVESTORS ARE FOCUSING ON KEY TECHNICAL LEVELS
According to Rajesh Palviya, Head of Research at Axis Direct, the market outlook remains cautiously positive.
"The Nifty has managed to hold above the 23,000 mark, but sustained strength will require a decisive breakout above the 23,300 resistance zone. A move beyond this level could open the path towards 23,400–23,500 in the near term," he said.
He added that immediate support for the index is placed at 23,050, followed by the crucial 23,000 level. A fall below these levels could trigger fresh profit booking.
Palviya said markets are likely to remain stock-specific and headline-driven, with crude oil prices and developments in West Asia continuing to guide investor sentiment.
BROADER MARKETS AND SECTORAL PERFORMANCE
The broader market showed a mixed trend. The Nifty Midcap 100 declined 0.15% and the Nifty Smallcap 100 slipped 0.18%, indicating that investors remained selective.
Among sectoral indices, apart from FMCG, Nifty Oil & Gas rose 0.58%, Nifty Private Bank gained 0.45% and Nifty Financial Services climbed 0.37%.
However, Nifty Metal was the biggest laggard, falling 1.04%, while Nifty Media declined 0.38% and Nifty Auto slipped 0.13%.
India VIX, the market’s fear gauge, was up nearly 1% to 15.73, showing that caution has not completely disappeared.
For now, the direction of crude oil prices and the next developments in the US-Iran conflict will remain the biggest triggers for Indian 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.)