Sensex gains over 1,100 points on US-Iran peace deal
What's the story
Indian stock markets witnessed a major surge in early trade on Monday, with the Sensex gaining over 1,100 points and the Nifty nearing the 24,000 mark. The rally was fueled by reports of a diplomatic breakthrough between the United States and Iran. The development could potentially restore traffic through the Strait of Hormuz and ease global energy supply concerns.
Market reaction
Nifty close to 24,000 mark
Around 9:20am, the BSE Sensex was at 76,669.26, up 1,141.31 points or 1.51%. The NSE Nifty 50 also followed suit with a gain of 347.50 points or 1.47%, reaching 23,970.40. The positive market response was in line with Asian markets after oil prices fell on expectations that a peace deal would ensure uninterrupted crude shipments from West Asia.
Oil market impact
US-Iran reach preliminary agreement to end hostilities
The optimistic market sentiment came after US President Donald Trump and Iran's deputy foreign minister announced an initial agreement to end hostilities and reopen the Strait of Hormuz. The strategic waterway is a key route for global oil trade. Pakistani Prime Minister Shehbaz Sharif, whose country reportedly mediated the talks, said a memorandum of understanding will be signed in Geneva on June 19.
Economic impact
Brent crude falls to lowest since March
Brent crude futures fell over 4% to around $84 a barrel, their lowest since March. The fall in oil prices is particularly significant for India, the world's third-largest crude oil importer. Lower energy costs are expected to ease inflationary pressures, reduce the import bill and support the rupee, improving India's overall macroeconomic outlook.
Stock performance
Financial stocks contribute significantly to rally
The market rally was broad-based with 46 of the 50 Nifty constituents gaining in early trade. InterGlobe Aviation, UltraTech Cement and Larsen & Toubro were among the top gainers, gaining up to 4%. Financial stocks also contributed significantly to the rally with HDFC Bank rising around 2%. State Bank of India, Axis Bank, ICICI Bank, and Kotak Mahindra Bank traded firmly in positive territory while Reliance Industries gained over 1%, adding to benchmark support.