Equity benchmarks staged a sharp rebound on Tuesday, with Sensex and Nifty recovering strongly after the previous session’s sell-off, as reports of potential backchannel negotiations between the US and Iran lifted global risk sentiment.

The Sensex rose 1,372 points to close at 74,068.45, while the Nifty 50 ended nearly 400 points higher at 22,912.40, with all sectoral indices finishing in the green in a broad-based rally.

Reports of negotiations trigger risk-on sentiment

Even as Tehran officially denied negotiations with Washington after Trump's claims that came last evening, the rally was triggered by reports suggesting backchannel diplomatic engagement between the two nations.

According to Al Arabiya, Iran’s foreign minister had conveyed to US envoy Steve Witkoff that Supreme Leader Ayatollah Ali Khamenei had agreed to negotiations. However, there has been no official confirmation from Iran on this development.

In a separate report, the US is also said to be exploring Iran’s parliament speaker Mohammad Bagher Ghalibaf as a potential interlocutor, indicating efforts to identify alternate channels for engagement.

These developments come even as US President Donald Trump has maintained that “major points of agreement” have been reached in ongoing discussions, despite public denials from Tehran.

Oil eases, global cues improve

Crude oil prices, which had surged amid fears of supply disruption in the Strait of Hormuz, moderated from recent highs, with Brent trading below the $100 mark during the trading hours.

The easing in oil prices, combined with expectations of reduced geopolitical risk, improved global market sentiment.

US equity futures rose sharply, indicating a strong opening on Wall Street, while Asian markets also traded higher.

Broad-based buying across sectors

The rebound in Indian markets was broad-based, with all major sectoral indices closing higher.

Rate-sensitive sectors such as banking and financials saw strong buying after recent declines, while metal stocks recovered after Monday’s sharp correction. IT stocks also remained supported by a weaker rupee.

IndiGo, Larsen & Toubro, Bajaj Finance, Eternal, Asian Paints, Apollo Hospitals, UltraTech Cement and Tech Mahindra are the top gainers on the Nifty 50 index, while Coal India, Power Grid Corp, Adani Enterprises, Sun Pharma, and Cipla saw declines during the trading session.

Tuesday’s gains come after a steep decline in the previous session, when the Sensex had plunged over 1,800 points and the Nifty fell 2.6%, amid escalating geopolitical tensions and rising crude prices.

The volatility index India VIX fell sharply on Tuesday indicating investors' confidence in the latest geopolitical developments. India VIX ended Tuesday 7.44% lower at 24.74.