Crude prices fall to $79 per barrel; markets rally as Nifty gains 4.5% in five sessions

A sharp decline in global crude oil prices following the US-Iran truce agreement has emerged as a key driver behind the recent rally in Indian equity markets, with benchmark indices posting strong gains amid improving macroeconomic sentiment.

The Nifty 50 has surged nearly 4.5% over the last five trading sessions and was hovering around the 24,100 mark on Thursday. Market participants attributed the rally largely to easing concerns over energy supply disruptions in West Asia, which triggered a steep correction in crude prices and improved the outlook for oil-importing economies such as India.

Brent crude, which had climbed above $95 per barrel during the peak of the conflict, has now retreated to around $78-79 per barrel. The nearly 15-20% decline in less than two weeks has significantly eased concerns about imported inflation and rising input costs across sectors.

The fall in oil prices is particularly beneficial for India, which imports more than 85% of its crude oil requirements. Lower crude prices help reduce the country's import bill, narrow the current account deficit and ease inflationary pressures. Economists said the development could provide greater room for policymakers to focus on growth while reducing pressure on government finances.

The decline in crude has also supported the Indian rupee, which has strengthened against the US dollar as investors turned optimistic about India's external sector outlook. A stronger currency, coupled with lower energy costs, is expected to improve corporate profitability in sectors such as aviation, paints, chemicals, logistics and consumer goods, which are heavily dependent on oil-linked inputs.

Investor sentiment has further improved as volatility indicators cooled. India VIX, commonly known as the market's fear gauge, has slipped to around 13, reflecting reduced uncertainty and stronger risk appetite among market participants.

The rally has not been limited to frontline stocks. Broader markets have also witnessed renewed buying interest, with mid-cap and small-cap indices outperforming in several sessions. Analysts said the combination of softer crude prices, easing geopolitical risks and improving market breadth has created a favourable environment for equities.

However, analysts believe that as long as oil remains below recent highs, Indian equities could continue to find support from improving macroeconomic fundamentals and stronger investor confidence.