Sensex and Nifty surges due to thaw in Middle East tensions

Investors witnessed a dramatic recovery on Dalal Street this Wednesday as the BSE Sensex climbed over 1,600 points during early trade. This sharp bounce-back follows a period of intense selling pressure, with the NSE Nifty 50 also reclaiming the critical 22,800 level. Improved sentiment stems primarily from signs of a diplomatic breakthrough in the Middle East, offering a much-needed reprieve to global risk assets.

Global Cues Drive Local Gains

Market sentiment shifted rapidly after reports suggested a potential timeline for de-escalation in the Iran conflict. Market analyst Ajay Bagga noted that a "Trump Peace" narrative has started to dominate, giving traders a reason to exhale after a volatile March. Historically, Indian markets remain sensitive to the Strait of Hormuz, a critical energy transit point that handles roughly 20% of the world's oil consumption. Any stability there immediately cools domestic inflation fears.

Despite the triple-digit gains, experts suggest caution. While Brent crude has settled near $105 per barrel, the Indian Rupee remains under pressure, trading near 96.71 against the US dollar. Ponmudi R of Enrich Money highlighted that while US and Asian markets provided a strong tailwind, persistent selling by Foreign Institutional Investors remains a concern. Domestic indices must sustain these levels to prove this is a true trend reversal rather than a temporary "dead cat bounce."

Technical indicators show that previous support levels near 22,500 for Nifty will now act as immediate hurdles. Shrikant Chouhan of Kotak Securities pointed out that Monday’s session saw extreme fear, with declining stocks far outnumbering gainers. Today’s opening suggests a bottom might be forming, though the transition from a "war economy" to a "truce watch" means volatility will likely persist until shipping routes fully stabilise.

With Agency Inputs