Nifty 50 jumps nearly 800 points in two sessions on US-Iran de-escalation hopes; can the rally sustain?

Amid optimism that the war clouds over the Middle East could potentially ease soon, domestic equities have witnessed renewed buying in recent sessions, instilling much-needed confidence among Dalal Street investors.

Elevated crude oil prices and concerns over gas shortages had triggered panic selling through most of March. However, sentiment has reversed following US President Donald Trump’s remarks suggesting a potential end to the war, boosting demand for riskier assets.

Over the last two trading sessions, the Nifty 50 has staged a sharp rebound, gaining 794 points, or 3.52%, to reach the 23,306 level, recovering a significant portion of its recent losses. Earlier this week, the index had slipped to its lowest level since April 2025.

Although the recovery has been sharp, the index is still down 7.5% so far in March, marking its steepest monthly decline since March 2020, when it fell 23.25%.

If the index closes the current month in the red, it will mark its fourth consecutive monthly loss. The last time the index recorded a four-month losing streak was between October 2024 and February 2025.

Nifty 50 navigates multiple challenges in early 2026

Investors had expected a stronger performance from the Indian stock market in the first quarter of 2026, amid hopes of an earnings recovery. However, concerns over AI-led disruptions, coupled with unexpected announcements in the Union Budget 2026 and the latest escalation of tensions in the Middle East, have weighed on sentiment.

The war concerns have also prompted overseas investors to turn net sellers throughout March, withdrawing ₹1.12 lakh crore so far, as per NSDL data. The outflows have not only impacted equities but have also put pressure on the rupee, which slipped to an all-time low of 94 against the US dollar.

India remains highly vulnerable to rising crude oil prices, as it imports nearly 85% of its oil requirements. A sharp spike in prices could fuel inflation and dent the earnings of companies that rely heavily on crude oil as a key raw material, while also prompting the RBI to hike interest rates.

For the government, higher crude prices could widen the import bill, requiring more rupees to purchase the same amount of dollars. This, in turn, may lead to imported inflation in the economy.

Unlike previous energy shocks, the ongoing US-Iran conflict has also led to disruptions in gas supplies, further weakening the overall energy outlook and adding to cost pressures across sectors.

Will Nifty 50 sustain recent gains?

Going ahead, analysts believe the sustainability of the current recovery will depend on how the war shapes up in the coming weeks, especially as both the US and Iran have submitted their respective terms to end the conflict.

Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services, said the ongoing recovery is likely to remain fragile and contingent on further clarity around geopolitical developments.

While he noted that easing crude prices and negotiation signals have provided near-term relief, any reversal in sentiment — particularly around risks to energy infrastructure — could quickly weigh on markets.

Bajaj Broking stated that volatility is expected to remain elevated in the near term due to uncertain global cues, firm crude oil prices, and ongoing geopolitical tensions. It projects that the index is likely to consolidate in the range of 22,450–23,850 in the coming sessions.

Hariprasad K, SEBI-registered Research Analyst and Founder, Livelong Wealth, said, "Despite the rally, volatility remains elevated, with India VIX holding above the 24 mark. This indicates that underlying nervousness has not materially eased, and the current upmove lacks strong institutional conviction."

"In a structurally strong rally, volatility typically compresses sharply—something that is yet to be observed—reinforcing the view that this is a tactical bounce within a broader uncertain environment," he further added.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.