Indian stock markets are trading in the green on Wednesday, with the Sensex and Nifty extending gains after a 4% rally over the past three sessions following the Iran-US deal framework and a sharp correction in oil prices, which have now dropped below $80 per barrel.
Sensex rose more than 250 points to trade at 77,050 mark, while Nifty 50 gained 55 points to trade at 24,000 level on Wednesday. The benchmark indices extended gains for the fourth consecutive session, while India VIX, which measures volatility in the market, tumbled around 7% to 13.36.
IndiGo, Mahindra & Mahindra, Infosys, Sun Pharma, HCLTech, Tech Mahindra, Adani Ports, Bajaj Finserv and HDFC Bank shares were the top gainers on Sensex, rising nearly 1% each. Maruti Suzuki shares, meanwhile, bucked the trend to fall around 1% in early trading hours on Wednesday.
Broader markets also extended gains, with Nifty Smallcap 100 and Nifty Midcap 100 indices gaining 0.3% each. All sectoral indices except Nifty Metal and Nifty Realty opened in the green. The market breadth was mostly positive, with 1,944 stocks advancing on NSE, while 1,348 declined and 123 remained unchanged.
Iran and the US agreed to a framework for their much-awaited peace deal recently, with details of the interim agreement emerging on Tuesday. US President Donald Trump said the deal would rule out a nuclear weapon for Tehran, while a US official said that it would allow Iran to sell oil upon signing.
Oil prices continued to decline, falling below $80 per barrel amid rising optimism. Brent crude futures fell 0.28% to $78 per barrel, while WTI crude futures declined around 0.3% to $76 per barrel, as seen on Wednesday morning.
What lies ahead?
There are two factors that are likely to influence the market trend in the near term, one positive and one negative, according to VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He highlighted that the positive factor is the steady and sharp decline in crude prices. Brent crude has declined steeply by around 16% in the last five days to about $79, thereby removing the major macro concern of a rising BoP deficit in India. The negative factor is the deficient monsoon, which is causing concerns, particularly about food inflation, he noted. “But monsoon may pick up in the coming days, as has happened in the past, and reduce anxiety on that front,” according to the analyst.
“From the market perspective, another distinct positive trend is the tapering of FII outflows. This trend is likely to continue since the rupee has been steadily strengthening and can appreciate further. The sharp correction in Brent crude to $79 and expectations surrounding massive capital flows to India via the FCNR B deposit route can lead to further appreciation in the rupee, which, in turn, will further dissuade FIIs from selling. They may even turn buyers anticipating further rupee appreciation. This can impart resilience to the market,” Vijayakumar further said.
Despite yet another stumble in the vicinity of 24,029 yesterday, the presence of bullish continuation patterns encourages retaining upside hopes, said Anand James, Chief Market Strategist at Geojit Investments.
“While we wait for a direct rise above 24,029 to play an upmove aiming 24,200 initially or towards 24,300-24,600, slippage past 23,800 may dilute momentum. A collapse is less expected though,” he added.
Nifty bias remains positive and is currently placed around the upper band of the last two months' falling channel, which also coincides with the previous swing high of 26 May, placed in the range of 24,050-24,100. Going ahead, a move above 24,100 will infuse further momentum and open upside towards 24,600 levels in the coming weeks. Failure to do so will lead to some consolidation in the range of 23,600-24,100 in the coming sessions,” said Bajaj Broking.
The domestic brokerage believes that the overall structure is positive, and any dips should be used to accumulate quality stocks in a staggered manner. "We expect the index to eventually break out above the 24,100 level and gradually head towards 24,600 levels. Immediate support is placed at 23,800 levels, while key short-term support is revised higher towards 23,500-23,600 levels, being the confluence of the 20-day EMA and the recent breakout area," it added.
