Sensex jumps 400 points, Nifty nears 23,400 as oil prices cool down despite Middle East tensions. What lies ahead?

The Indian stock market traded on a positive note, with Sensex rising more than 0.6% while Nifty recorded 0.2% gains as both benchmark indices closed in on the divergence seen in the previous few sessions as oil prices dropped.

Sensex gained 410 points to 74,707, and Nifty gained 46 points to trade near 23,400 on Monday morning, as seen at around 10.15 am. Broader markets, however, slipped into the red, with Nifty Midcap 100 and Nifty Smallcap 100 indices falling up to 0.4%.

UltraTech Cement, Sun Pharma, HCL Tech, Asian Paints and IndiGo shares rose 2-3% to lead gains on Sensex, while shares of Power Grid, Bharti Airtel and Infosys fell more than 1% each. Among the sectors, Nifty FMCG and Nifty Pharma rose over 1% each, while Nifty IT dropped 0.6%. The overall market breadth remained flat, with NSE seeing 1,600 advances and 1,641 declines, while 107 stocks remained unchanged.

What lies ahead for Dalal Street?

Global geopolitical risks are increasing, V K Vijayakumar, Chief Investment Strategist at Geojit Investments, noted. He added that the conflicts in the Middle East and the Russia-Ukraine war are escalating. However, Brent crude has declined to below $102 per barrel, due to increasing oil flow through the Strait of Hormuz.

The US 10-year bond yields are hovering around 5%, posing a threat to equity markets. But equity markets are holding their ground, taking cues from the robust growth in developed economies and expectations of good corporate earnings, Vijayakumar said, adding that in India, too, this pattern is playing out.

“GDP growth of 7% and Nifty earnings growth of 12 to 14% are achievable in FY27. The broader market earnings growth will be much better. These expectations are already in the price since the mid-and small-cap valuations are at a significant premium to large-caps. A sectoral pivot to large-caps is likely. But this will happen only when the Iran-US conflict is resolved, and crude and bond yields decline. Investors should wait for this pivot and, meanwhile, accumulate high-quality large-caps available at attractive valuations,” according to the analyst.

With Nifty having reached within touching distance of the 23,400 objective, a consolidation is expected, said Anand James, Chief Market Strategist at Geojit Investments. He, however, said that the favoured view expects this phase to be short-lived and a rise to 23,560 and beyond may be expected if dips are contained above 23,280/260.

“Meanwhile, we will wait for a break past 23,116 to reconsider prospects of 22,600-21,800,” the analyst noted.