US-Iran peace hopes spark market rally, indices surge 2%

While domestic institutions led by insurance companies and mutual funds pumped Rs 5,341 crore into the market, foreign investors pulled out Rs 1,082 crore on Friday.

Market participants attributed the sharp rise largely to expectations of a possible diplomatic breakthrough between the US and Iran. Hopes of de-escalation in the conflict-ridden region triggered a decline in crude oil prices, a development that is particularly beneficial for India, one of the world’s largest oil-importing nations.  Lower oil prices are expected to reduce inflationary pressures and improve the country’s fiscal outlook, prompting fresh buying across sectors. Supporting the bullish sentiment, the Indian rupee recorded a significant recovery, appreciating by 64 paise to close at 95.11 against the US dollar. The rupee benefited from the sharp fall in global crude prices and weakness in the American currency.

The strengthening rupee also boosted investor confidence by easing concerns over imported inflation and foreign capital outflows, traders said.

Brent crude, which had traded near $93 per barrel in overnight dealings, fell sharply after Trump reportedly cancelled plans for additional military strikes against Iran.

The rally on Dalal Street was broad-based, with all major sectoral indices ending in positive territory. Realty, financial services, PSU banks, private banks and consumer durable stocks led the gains, rising between 2 and 4%. Information technology stocks, while ending higher, underperformed the broader market and remained the session’s relative laggards.