Indian Stock Market Surges Amid Signs of Easing Geopolitical Tensions

Market Update: Indian Equities Recover Amid Hopes of US-Iran Ceasefire

On Wednesday, Indian equity benchmark indices closed in the green, with the BSE Sensex ending 1.6% higher at 75,273.45 and the Nifty 50 closing at 23,306.45, up 1.7%. The broader market also recovered, with the Nifty Midcap 100 closing 2.3% higher and the Nifty Smallcap 250 settling 2.5% higher.

The optimism was sparked by reports that Iran has received a detailed 15-point ceasefire proposal from the US, raising hopes that diplomatic backchannels may finally be opening up. BSE-listed companies added ₹8.23 trillion to their market capitalization on Wednesday.

The Nifty 50 is now down over 7% since the US-Iran conflict began, but intermittent bouts of buying have helped it claw back nearly half of those losses. The index had slipped more than 12% at one point amid peak geopolitical stress.

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Sectoral indices on the NSE also ended in the green, with Nifty Consumer Durables rising the most, up 3.5%, followed by Nifty Financial Services Ex-bank gaining 2.8%.

India VIX, a gauge of market volatility and fear, also ended 0.4% lower on Wednesday.

Macro Outlook

A correction of this magnitude warrants more aggressive equity investing, depending on risk appetite, as a reasonable part of the market is now fairly valued or offering better value than six to nine months ago, according to Harish Krishnan, chief investment officer of equity at Aditya Birla Sun Life AMC.

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Krishnan is increasing exposure to three areas: energy-intensive companies, where near-term challenges exist but prices are expected to normalize; domestic consumption, which remains a strong long-term story despite current weakness; and financials, which are undervalued despite stable earnings.

Fixed Income and Crude Oil

The rupee slipped to a fresh record low of 93.97 as high crude oil prices continued to weigh on it. Brent crude oil was trading at $93.43 per barrel.

According to a 25 March report by Bernstein, the crude spike has persisted as the conflict enters the fourth week. The brokerage has retained its neutral stance and believes the rupee will continue to see pressure this year at various points.

India's 10-year bond yield has risen by 3.2265 percentage points since the war began, suggesting some pressure but not a sharp selloff, and that the bond market is adjusting, not panicking.

Devang Shah, head - Fixed Income at Axis Mutual Fund, says markets are firmly in wait-and-watch mode, with clarity on the US-Iran deal and its fine print now being the key 'swing factor'. His base case is that a resolution comes through in the next 15-20 days; any delay, he cautions, could start feeding into higher inflation and softer growth.

Potential Sentiment Shift in Fixed Income

For the bond market, Shah sees a potential sentiment shift between June and September, when India's inclusion in the Bloomberg Global Aggregate Index could bring in $20–25 billion of inflows and lend a more constructive tone to fixed income.