Fresh hopes of US-Iran talks bring peace to D-Street

India’s equity indices jumped 1.6% on Wednesday, tracking gains elsewhere, after reports of a second round of talks between the US and Iran boosted market expectations of the war in West Asia ending soon. The optimism remains tentative as investors weighed Donald Trump’s rhetoric on the resumption of peace talks between Washington and Tehran against the US blockade of Iranian ports, keeping oil prices elevated.

Some Recovery Since Ceasefire

The NSE Nifty ended at 24,231.30, up 1.6% or 388.65 points over Monday’s close. The BSE Sensex finished at 78,111.24, up 1.6% or 1,263.67 points. Indian markets were shut on Tuesday for Ambedkar Jayanti.

“Trump’s remark that there will be no need to extend a ceasefire has led investors to believe that the US and Iran may be on the verge of a peace deal,” said Dharmesh Kant, head of research, Cholamandalam Securities. “At the same time, until the Strait of Hormuz opens completely, markets will be walking on thin ice.”

Trump, according to news reports, said that the US-Iran peace talks could resume in Islamabad over the next two days following the breakdown of negotiations over the weekend. Earlier, the US said its navy had blockaded traffic to and from Iranian ports in response to Iran’s disruption of shipping through the Strait of Hormuz.

Brent crude futures rose 1.6% to $96.2 a barrel on Wednesday after dropping 4.6% on Tuesday. Elsewhere in Asia, South Korea gained 2.1%, and Taiwan climbed 1.2%. Japan, China and Hong Kong rose between 0.1% and 0.4%.

The halt in the offensive has been reassuring for equity investors with the Sensex and Nifty gaining nearly 5% from oversold levels since the two-week ceasefire between the US and Iran began on April 8.

The Volatility Index (VIX) — the street’s fear gauge — fell 8.9% to 18.7, as the market rebound eased near-term risk perception. Foreign portfolio investors (FPIs) bought shares worth a net ₹666.15 crore on Wednesday. Their domestic counterparts sold shares worth ₹568.98 crore. So far in April, global investors dumped shares worth ₹48,198.7 crore .

The momentum of the rebound could carry the main indices even higher. “The prudent rally since April 2 has recovered 50% of the previous fall at 24,278 levels,” said Vipin Kumar, AVP, equity research and PMS, derivatives and technical analyst, Globe Capital Market. “Any close above 24,350 levels can propel Nifty towards 24,650-24,800 levels if there is no escalation.”
All sectoral indices closed higher on Wednesday.