Markets gain as crude retreats, U.S. yields ease; Sensex up 330 pts, Nifty near 24,340 level
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Indian equity benchmarks belled the day in positive terrain on Wednesday, supported by a sharp decline in crude oil prices, easing U.S. treasury yields and positive global cues. The Sensex rose as much as 330 points to hit a high of 77,986.84 in the first hour of trade, while the Nifty gained 44 points to touch 24,378.60.
The BSE Sensex opened at 77,892.10, while the NSE Nifty made a flat opening at 24,341.95.
The broader market also saw firm trading, with the Nifty Midcap 100 rising 0.35%, while the Nifty Smallcap 100 gained 0.41%. India VIX, a measure of market volatility, declined 3.04% to 10.74, indicating stability in the market.
Among sectoral indices, Nifty PSU Bank was the biggest gainer, rising 1.33%, followed by Nifty Financial Services 25/50 and Nifty Private Bank, which gained 0.81% and 0.90%, respectively. Nifty Media rose 0.65%, while Nifty Pharma, Realty, Healthcare and Oil & Gas also traded higher.
The Nifty Auto, IT and Consumer Durables indices were trading marginally lower, declining 0.04%, 0.19% and 0.21%, respectively.
Among Sensex constituents, Kotak Mahindra Bank led the gainers, rising 1.87%, followed by Eternal at 1.57%, UltraTech Cement at 1.43%, Bajaj Finserv at 1.37% and ICICI Bank at 1.26%. SBI, NTPC, Hindustan Unilever, Bajaj Finance and ITC also traded higher.
On the other hand, Infosys declined 1.14%, making it the biggest loser on the Sensex. Bharti Airtel fell 0.73%, Larsen & Toubro declined 0.67%, while Tata Steel and BEL slipped 0.38% and 0.44%, respectively.
Crude oil, U.S. yields in focus
The key positive trigger for Indian equities was the decline in crude oil prices. Brent crude fell to around $86.3 a barrel amid renewed optimism that shipping through the Strait of Hormuz could gradually resume. Iran and Oman have been discussing arrangements for managing traffic through the strategic waterway, easing some concerns over prolonged supply disruptions.
For India, which is heavily dependent on imported crude, lower oil prices are viewed positively as they can help ease inflationary pressures, support the rupee and reduce pressure on corporate margins.
U.S. Treasury yields also declined, providing an additional positive cue for global equities. The US 10-year Treasury yield fell to around 4.64%, while U.S. equities ended higher overnight. The S&P 500 and Dow Jones gained 0.3% each, while the Nasdaq advanced 0.7%.
“Two factors which are positive for the market today. One, news of another ceasefire between the U.S. and Iran and initiatives for resuming shipping through the Strait of Hormuz have brought down the Brent crude rate to $86.3. Since a rally in the Indian market has been mainly constrained by the elevated crude prices, this sharp dip in crude is a positive. Two, the dip in bond yields in the U.S. (10-year at 4.64%) is a mild positive for equity markets, globally,” said V K Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
Positive global cues lift sentiment
However, Vijayakumar cautioned that the positive triggers may not be sufficient to spark a sharp rally in the Nifty, given technical weakness in several large-cap stocks. “The market rally will be led by the broader market which is driven by supporting fundamentals and momentum. It is also important to note that valuations in the broader market are getting stretched,” he said.
The market's broader setup was also supported by the overnight rally on Wall Street and gains across several Asian markets. Global investors remained focused on developments around the Strait of Hormuz, crude oil prices and upcoming US economic data.
Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, said the improvement in technical momentum was being reinforced by a more supportive global backdrop, led by easing crude oil prices and resilient US equities.
“The most significant development for domestic markets is the continued decline in crude oil prices. Brent crude has eased to around $85.5 per barrel, extending its retreat from last week's peak near $94, as concerns over supply disruptions continue to recede,” he said.
Radhakrishnan said the easing geopolitical risk premium following developments involving the US, Iran and Oman had further supported sentiment. Any progress towards reopening the Strait of Hormuz could provide additional support to energy markets and global risk assets.
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