Sensex ends 2,946 points up; investors earn ₹17 lakh crore in a day— What drove the stock market higher?
The Sensex ended with a strong gain of 2,946 points, or 3.95%, at 77,562.90, while the Nifty 50 closed 874 points, or 3.78%, higher at 23,997.35.
The Indian stock market witnessed strong buying on Wednesday (April 8), with the benchmark indices- the Sensex and the Nifty 50- closing almost 4% higher.
The Sensex ended with a strong gain of 2,946 points, or 3.95%, at 77,562.90, while the Nifty 50 closed 874 points, or 3.78%, higher at 23,997.35.
The rally was broad-based as the Nifty Midcap 100 and the Nifty Smallcap 100 indices jumped over 4% each.
The volatility index India VIX plunged by more than 20% to fall below the 20 level, reflecting easing market nervousness.
Among the sectoral indices, Nifty Bank and Financial Services surged almost 6%, while the Realty and Auto indices surged up to 7%.
The overall market capitalisation of BSE-listed firms jumped to nearly ₹446 lakh crore from ₹429 lakh crore in the previous session, making investors richer by ₹17 lakh crore.
It was the fifth consecutive session of gains for the Sensex and the Nifty 50. Over these five sessions, the Sensex has jumped 5,615 points, or nearly 8%, while the Nifty 50 has surged 1,666 points, or 7.5%.
Why did the Indian stock market rise today?
Here are five key factors behind the rise in the Indian stock market:
1. US-Iran ceasefire
US President Donald Trump announced Washington will suspend military actions against Iran for two weeks. Iran has also accepted the ceasefire plan.
Moreover, talks between the US and Iran will begin in Islamabad on Friday. The market is cheering the prospects of a final announcement about the end of the West Asian war in the coming few days.
"The two-week ceasefire between the US and Iran has dramatically altered the near-term market scenario. The crash in Brent crude to $ 95 following the ceasefire will again turn the market bullish. This ceasefire, particularly the agreed reopening of Hormuz Strait, will embolden the bulls to charge again, aided by the fair market valuations," VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.
2. Crude oil prices crash
Brent Crude prices crashed 14% to drop below $95 a barrel, infusing positive sentiment into the stock market, as hopes prevailed that uninterrupted crude oil supply through the Strait of Hormuz could resume soon.
A crash in crude oil prices is a major relief for the Indian economy and stock market. A sustained fall in crude oil prices can improve the Indian economy's growth outlook, support the currency, and may brighten the prospects of foreign capital inflows.
3. Dollar falls over 1%; rupee jumps
The dollar index declined by more than 1% to 98.69 amid a crash in crude oil prices and easing geopolitical tensions.
Meanwhile, the Indian rupee gained further in early deals on Wednesday, influencing domestic market sentiment. According to Bloomberg data, the Indian rupee jumped 41 paise to end at 92.58 per dollar on Wednesday after the US and Iran agreed to a two-week ceasefire.
A weaker dollar and stronger rupee can nudge foreign portfolio investors to change their stance on Indian equities.
"Rupee will strengthen, and this may even force the FPIs to turn buyers; at least they will have to cease the sustained selling, which will become irrational in the present context," said Vijayakumar.
4. Positive global cues
Positive global cues also influenced domestic market sentiment. After the US-Iran ceasefire announcement, major Asian markets, including Korea's Kospi and Japan's Nikkei, jumped up to 6%. In Europe, CAC, DAX, and FTSE surged up to 4%. Dow Jones futures jumped about 3%.
According to Bloomberg, strategists believe the ceasefire between the US and Iran brings welcome relief to Asian markets even as volatility may continue due to the lack of clear details on the agreement and concerns over the Strait of Hormuz.
5. RBI keeps rates unchanged
The Reserve Bank of India (RBI) did not throw any surprises at the market as the Monetary Policy Committee (MPC) kept the repo rates unchanged at 5.25%, and maintained policy stance at ‘Neutral’.
"The MPC has kept rates unchanged as per expectations. Given the ongoing West Asia crisis, the MPC is likely to be data-dependent in the future and will be supportive in providing liquidity. The policy is expected to be on pause with a neutral stance. Policy is therefore supportive of growth and equity and bond markets," said Poonam Tandon, Chief Investment Officer, IndiaFirst Life.
Read all market-related news here
Read more stories by Nishant Kumar
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.