Sensex Soars Over 650 Points Despite Iran-US Tensions; Here’s What’s Driving the Rally

Sensex Rallies Over 650 Points Despite Iran-US Tensions; Here’s What’s Driving the Market

Indian equity markets rebounded sharply on Thursday, with the Sensex surging more than 650 points and the Nifty reclaiming the 24,000 mark, even as escalating tensions between the US and Iran pushed crude oil prices higher. The recovery came a day after benchmark indices fell nearly 2 per cent, with investors taking advantage of lower valuations amid signs that the geopolitical conflict may not worsen immediately.

In early trade, the BSE Sensex climbed over 530 points to trade above 77,000, while the Nifty 50 gained around 156 points to cross 24,000. The broader market outperformed the benchmarks, with the Nifty Midcap 100 and Nifty Smallcap 100 posting gains of over 1 per cent.

Among sectors, Banking and FMCG stocks led the rally, while IT shares remained under pressure, with the Nifty IT index falling around 2 per cent.

Despite the market’s gains, global concerns remained elevated after crude oil prices climbed to nearly $78 a barrel following renewed military exchanges between the US and Iran.

Three Key Reasons Behind the Rally

1. India VIX Drops Sharply

Investor sentiment improved as the India VIX, which measures expected market volatility, declined nearly 9 per cent to around 13.4. The fall in the fear gauge suggested easing concerns among traders despite geopolitical uncertainty.

2. Value Buying After Recent Correction

Market participants also returned to quality stocks following Wednesday’s sharp sell-off. Analysts believe the recent correction has made several fundamentally strong stocks more attractive from a valuation perspective.

VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that while crude oil prices have risen, markets are not yet pricing in a prolonged disruption. According to him, oil prices near $80 per barrel are manageable for India, and concerns would intensify only if the Strait of Hormuz remains closed for an extended period and crude surges beyond $100.

3. Continued FII Inflows

Foreign Institutional Investors (FIIs) remained net buyers for the fourth consecutive trading session, purchasing Indian equities worth Rs 1,963 crore on Wednesday. Domestic Institutional Investors (DIIs) also turned net buyers again, investing Rs 790 crore, providing additional support to the market.

With institutional buying continuing and volatility easing, investors looked past immediate geopolitical risks, helping Indian equities stage a strong recovery despite heightened tensions in the Middle East.