Brent crude prices slumped on Monday, while domestic stocks and the rupee rallied on hopes of a lasting resolution to the US-Iran conflict.
Brent crude fell 5.7 per cent to $94.6 per barrel, its lowest level since April 21, after US President Donald Trump said over the weekend that Washington and Tehran had largely negotiated a memorandum of understanding for a peace deal. He also indicated that the Strait of Hormuz — through which nearly a fifth of global oil supplies transit — would be reopened. Brent slipped below the $100-per-barrel mark for the first time in over two weeks.
The Sensex ended at 76,489, up 1,074 points or 1.4 per cent, while the Nifty closed at 24,032, gaining 312 points or 1.3 per cent. For both indices, this marked the strongest daily advance since April 15 and their highest closing levels since May 8.
The decline in oil prices improved global risk appetite and offered relief to import-dependent economies such as India, where elevated crude prices had recently stoked concerns around inflation, fiscal pressures and corporate margins.
“The sharp decline in oil prices triggered aggressive short-covering and a massive buying wave across banking, automotive and heavyweight stocks, effectively neutralising concerns over recent domestic fuel price hikes,” said Mayank Jain, market analyst at Share Market by PhonePe.
However, officials from both the US and Iran cautioned that a final agreement may still take time. The rupee appreciated 0.5 per cent against the dollar to close at 95.23. Despite Monday’s recovery, the currency remains down 5.6 per cent against the dollar so far this year.
According to Seshadri Sen, head of research, Emkay Global Financial Services, markets appear to be pricing in a post-war normalisation in earnings and valuations, though any prolonged disruption in the Strait of Hormuz could once again weigh on corporate earnings and equity valuations.
He noted that while headline valuations have moderated, they remain “unattractive”, with the Nifty trading broadly in line with its long-term average based on FY27 earnings estimates.
All NSE sectoral indices, barring one, ended higher. Banking stocks — which had borne the brunt of foreign institutional selling during the recent geopolitical turmoil — witnessed a relief rally amid hopes of de-escalation. The Nifty Bank index rose 2.3 per cent. HDFC Bank and ICICI Bank were the top contributors to the Sensex gains.
Shares of oil marketing companies also advanced after India raised petrol and diesel prices for the fourth time in May. Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation gained between 3 per cent and 4 per cent.
Despite the optimism, market participants remained cautious about the sustainability of the rally amid lingering geopolitical and global macroeconomic risks.
Sen flagged rising US bond yields as a potential headwind for Indian equities, warning that a narrowing US-India yield differential could hurt foreign inflows, pressure the rupee and compress valuation multiples, particularly in long-duration sectors such as consumer and internet businesses.
The total market capitalisation of BSE-listed firms increased by Rs 5.86 trillion to Rs 468.7 trillion. Market breadth remained strong, with 2,703 stocks advancing against 1,607 declines.
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