Benchmark indices extended their positive momentum for the fourth consecutive session, with NIFTY50 surging nearly 4% in four sessions and trading near the 24,000 mark. According to The Hindu, the rally was driven by reports that the United States and Iran have agreed upon a preliminary agreement to end the war in the Middle East and reopen the Strait of Hormuz, with a final peace deal to be signed on Friday. The countries will sign a memorandum of understanding in Switzerland on Friday, with Pakistani Prime Minister Shehbaz Sharif serving as mediator in the negotiations. Brent crude has fallen below $80 per barrel after having approached $120 per barrel during the peak of the US-Iran war, with the immediate beneficiaries expected to be Oil Marketing Companies (OMCs), transportation companies, cement manufacturers, select banks and NBFCs, and companies with significant exposure to Middle East infrastructure projects. On Wednesday, Brent crude futures slipped 0.28% to $78 per barrel, while WTI crude futures eased nearly 0.3% to $76 per barrel in Wednesday morning trade. As per The Hindu, Brent crude, the global oil benchmark, traded at around $79.10 per barrel on Wednesday.
Oil-linked companies experienced significant gains as Brent crude oil futures declined below $80 per barrel, following the US-Iran peace deal announcement. As reported by Reuters, oil marketing companies, tyre makers, paint makers and airlines jumped on the drop in crude prices. Oil marketing companies such as Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) could see an improvement in marketing margins as crude prices ease. However, oil upstream firms ONGC and Oil India (OIL) were in the red following the sharp drop in oil prices. Aviation sector companies are also likely to benefit significantly, as lower aviation turbine fuel (ATF) prices can reduce operating costs and improve profitability. The final leg of Vedanta Ltd's demerger process was also completed on Monday, with all four demerged entities beginning trading on BSE and NSE. Lower oil prices are particularly positive for India, the world's third-largest oil importer, as they help ease pressure on inflation, the rupee and the country's trade deficit.
On Wednesday, the 30-share BSE Sensex climbed 347.14 points, or 0.45%, to settle at 77,155.62, while the 50-share NSE Nifty rallied 96.55 points, or 0.40%, to end at 24,085.70. According to The Hindu, during the day, the Sensex jumped 410.51 points, or 0.53%, to 77,218.99, and the Nifty advanced 119.05 points, or 0.49%, to 24,108.20. Among the 30 Sensex firms, Trent jumped the most by 7.06%, followed by Bharat Electronics, Eternal, Tata Steel, Infosys, Titan and Bharti Airtel as major winners. Bajaj Finserv, Axis Bank, Kotak Mahindra Bank, and Mahindra & Mahindra were among the laggards. On Tuesday, the Sensex had jumped 544.15 points, or 0.71%, to settle at 76,808.48, and the Nifty climbed 135.25 points, or 0.57%, to end at 23,989.15. As per The Hindu, Vinod Nair, Head of Research, Geojit Investments Limited, said that continued weakness in crude oil prices, driven by easing geopolitical tensions around the Strait of Hormuz, has kept investor sentiment buoyant.
The positive sentiment extended across all market segments, with fourteen of the sixteen major sectors advancing. According to Reuters, the broader small-caps (.NIFSMCP100) rose 1.6% and mid-caps (.NIFMDCP100) gained 1.4%. On Wednesday, the Sensex climbed over 250 points to trade around the 77,050 mark, while the Nifty 50 gained 55 points to hover near the 24,000 level. HDFC Bank, the heaviest-weighted stock on the benchmarks, jumped 2% to lead gains. Infrastructure major Larsen & Toubro gained 3.3%, which has significant revenue exposure to the Middle East. India's 10-year bond yield slid to its lowest level since March 25, while the rupee gained 0.52% to 94.6100 per dollar. As noted by VK Vijayakumar, chief investment strategist at Geojit Investments, "With the dawn of peace in West Asia, hopefully, and the consequent sharp correction in Brent crude to below $84 in early trade, the prospects for the Indian economy and stock market have turned for the better." The Indian rupee strengthened sharply against the US dollar, up 40 paise to trade close at ₹94.71.
Companies that benefit directly from lower energy costs are expected to remain in focus, with sectors such as paints, chemicals, automobiles, infrastructure, and logistics likely to benefit from lower raw material and transportation costs. According to Choice Equity Broking, stocks such as BPCL, InterGlobe Aviation (IndiGo), Larsen & Toubro (L&T), Asian Paints, Rallis India, FACT, and National Fertilizers Ltd (NFL) could remain in focus due to favourable business conditions and attractive technical setups. Commercial vehicle segment companies such as Tata Motors and Ashok Leyland may gain from improved sentiment, as economic confidence improves and operating costs decline. Vehicle financing firms such as Shriram Finance and Cholamandalam Investment and Finance Company may also gain from improved auto sector sentiment. FMCG companies such as Bajaj Consumer Care, Hindustan Unilever, and Godrej Consumer Products could benefit from lower input and transportation costs. Market breadth remained strongly positive with 2,510 stocks advancing, 831 declining and 112 remaining unchanged out of 3,453 stocks that traded on NSE on Monday.
