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The Indian stock market benchmarks — Sensex and Nifty 50 — extended gains to a second consecutive session on Wednesday, March 25.

Sensex jumped by 1,205 points, or 1.63%, to end the day at 75,273, while Nifty 50 rose by 394 points, or 1.72%, to settle at 23,306. The mid and small-cap indices on the BSE jumped more than 2% each.

Investors' wealth rose by ₹8 lakh crore as the overall market capitalisation of companies listed on the BSE rose to ₹431 lakh crore from about ₹423 lakh crore in the previous session.

In just two consecutive sessions, the Sensex has surged 2577 points, or 3.5%, while the Nifty 50 has jumped 794 points, or 3.5%.

Investors have become richer by ₹16 lakh crore, as the cumulative market capitalisation of BSE-listed firms stood at ₹415 lakh crore on March 23.

Let's take a look at five key factors behind the rally in the stock market:

Reports of positive developments between the US and Iran are cheering the market.

US President Donald Trump claimed Washington DC and Tehran have “major points of agreement” and ordered a five-day suspension of US strikes on Iranian energy infrastructure, raising hopes of a diplomatic breakthrough.

Israeli media on Monday claimed that the US has set April 9 as a potential date to end the war against Iran.

"Hope is returning to the market with indications of de-escalation in the conflict. Remarks from President Trump and from the Iranian regime indicate that the conflict might end soon. Particularly, the reiteration from Iran that ‘non-hostile ships can transit the Strait of Hormuz’ is good news that will mitigate India’s energy concerns," VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.

The US–Iran conflict had sparked concerns of a potential inflation surge, prompting fears of monetary tightening and a slowdown in economic growth. However, signs that the conflict may be nearing an end have eased worries about its severe impact on India’s macroeconomic outlook.

Experts note that if crude oil prices remain subdued and inflation stays under control, central banks could consider cutting interest rates in the second half of the current year.

Positive global cues boosted the overall market sentiment. Almost all major Asian markets were in the green in early trade. Japan's Nikkei and Korea's Kospi jumped up to 3%, while China's Shanghai Composite index climbed by 1% amid reports of peace talks between the US and Iran.

Brent crude prices crashed by more than 5% to fall below the $100-per-barrel mark following reports of the US diplomatic push to resolve the Middle East conflict.

Brent Oil Futures June contracts dipped to $93.45 amid easing geopolitical risks.

"Positive geopolitical developments have reflected in a sharp decline in Brent crude to around $98. The US 10-year yield has also declined. Gold has recovered. If this positive development sustains, there is room for a sharp rebound in the market," said Vijayakumar.

India is the world's third-biggest oil importer and consumer, and it meets about 80- 90% of its crude oil requirements through imports.

Elevated crude oil prices increase the risk of India's inflated import bill, widen its current account deficit, pressure its fiscal deficit targets, weaken the currency, raise inflation, and trigger foreign capital outflows.

According to brokerage firm Motilal Oswal Financial Services, crude oil accounts for 23% of India’s import bill, and every $10 per barrel rise could widen the oil deficit by $10–12 billion (0.4–0.5% of GDP).

Easing geopolitical risks and a significant decline in crude oil prices weighed on the US dollar and bond yields. The dollar index declined by nearly 0.40% to near 99, while the benchmark 10-year US bond yield dropped by 1.5% to 4.32%.

A decline in the US dollar and bond yields is generally positive for equities, especially for emerging markets like India, as it increases the prospects of foreign capital inflows into these markets.

Technical experts note that Nifty futures are showing a potential bullish reversal pattern.

"On the daily timeframe, Nifty futures formed a bullish Pinbar candlestick pattern on Tuesday. This formation is typically considered a sign of a potential bullish reversal in the index. As per the characteristics of the Pinbar pattern, traders may consider initiating long positions above the high of the candle, while placing a stop-loss below its low," said Sachin Gupta, VP Research, Choice Broking.

According to Gupta, the index futures are expected to find immediate support around the 22,600 mark, followed by a stronger support near the recent swing low of 22,470. On the upside, resistance is likely to be encountered around 23,650, which coincides with a recent gap-down zone and may act as a hurdle for further upward movement.

On the derivatives front, Gupta highlighted that the highest call writing has been observed at the 23,000 and 23,200 strike prices. Conversely, the highest put writing is seen at the 22,900 and 22,800 strikes.

Meanwhile, the volatility index, India VIX, declined further on Wednesday.

"The drop in VIX reflects easing volatility and a reduction in risk perception among market participants, which generally supports a more stable and positive market outlook in the near term," said Gupta.

According to Ajit Mishra, SVP- Research, Religare Broking, the 22,700–22,500 band is likely to act as an immediate support area for the Nifty 50. However, the index may face immediate resistance around 23,200, with a stronger hurdle in the 23,400–23,600 zone.

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stories by Nishant Kumar

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.Nishant is a market reporter at Mint, where he holds the official designation of Principal Correspondent – Markets. He has been closely tracking the Indian stock market as well as major global stock markets along with the broader macroeconomic trends for a decade.

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