Bulls return to D-Street as falling oil prices ease geopolitical jitters

Mumbai: India’s equity indices rose over 1% each on Wednesday in a late surge, logging their strongest single-day gain in nearly three weeks, after reports of a possible US-Iran accord led to an 8% plunge in oil prices. “The biggest hero and villain of this story are oil prices, which plummeted on easing tensions, and stoked optimism,” said Lakshmi Iyer, group president and chief executive, Bajaj Alternates. “Investors cheered the possibility of a resolution of war between the US and Iran.”

Easing Volatility
This “has been hanging like a sword over markets,” said Iyer.

The NSE Nifty 50 advanced 1.2%, or 298.15 points, to close at 24,330.95, while the S&P BSE Sensex climbed 1.2%, or 940.73 points, to 77,958.52.

Brent crude futures dropped to around $100.7 a barrel, after holding above the $100 level for nearly two weeks, with the US and Iran said to be closing in on an agreement to end the war in the Gulf. US President Donald Trump, however, warned that if Iran doesn’t agree to US demands, bombing will resume at a “higher level and intensity.”

The fall in oil prices boosted global sentiment.

South Korea surged 6.5%, while China and Hong Kong rose 1.2% each. Taiwan added 0.9% and Japan gained 0.4%.

Iyer said oil prices remain pivotal and a sustained move below the $100-a-barrel mark could extend the rally, while failure to do so may keep markets range-bound.

Back home, volatility eased. The India VIX dropped 6.9% to 16.7, closing below 17 for the first time since the onset of the conflict, signalling lower near-term risk expectations. The rebound on Wednesday helped shrug off the recent lethargy.

“Nifty was struggling to sustain at higher levels in the past eight sessions and the rebound in Wednesday’s session pushed it above a cluster of averages at 24,000 levels, and the index surpassed 24,300 levels,” said Nilesh Jain, vice president, head of technical and derivative research, Centrum Finverse.

Jain expects the index to move toward 24,500-24,600 levels in the near term, supported by follow-through buying, with dips likely to be bought.