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The Indian stock market saw strong buying interest on Tuesday, March 24, with the benchmarks — Sensex and Nifty 50 — rising about 2% each.

BSE barometer Sensex jumped 1,372 points, or 1.89%, to close at 74,068, while the Nifty 50 rose by 440 points, or 1.78%, to settle at 22,912. The BSE 150 Midcap index and the BSE 250 Smallcap index added 2.5% and 2.2%, respectively.

Investors earned ₹8 lakh crore in a single session as the cumulative market capitalisation of BSE-listed firms rose to nearly ₹423 lakh crore from ₹415 lakh crore in the previous session.

Let's take a look at 4 key factors behind the stock market rally.

US President Donald Trump's comments that Washington and Tehran are engaged in talks to finalise a comprehensive resolution of the Middle East conflict eased one of the biggest concerns for global stock markets.

Trump said on March 23 that over the last two days, Iran and the US have had “very productive conversations regarding a complete and total resolution of hostilities in the Middle East”.

Meanwhile, Israeli media reported on March 23 that the US has set 9 April as a potential date to end the ongoing war against Iran.

Trump's softer tone on Iran and positive news flows indicating the end of the war could be near boosted market sentiment.

The domestic market is mirroring trends in other major Asian markets. Key indices in Japan, Korea, and China rose by up to 2% during the session following a solid more than 1% gain in the S&P 500 and Nasdaq overnight.

The rally in global markets was fuelled by Trump's remarks that the US military will postpone planned strikes on Iran’s power and energy infrastructure by five days after discussions with Iranian officials.

Market participants might have turned to short covering amid signs of easing geopolitical tensions, pushing the market into an oversold state.

On Monday, the 22,000 strike, followed by 22,500, held the maximum Put open interest, suggesting these levels may act as key support for the Nifty.

According to Shrikant Chouhan, the head of equity research at Kotak Securities, a bullish candle on daily charts and a reversal formation on intraday charts indicate the continuation of the pullback rally in the near future.

Chouhan believes that 22,800 and 22,650 would act as key support zones for traders. Above these levels, the market could continue its positive momentum till 23,175-23,300.

However, Chouhan said below 22,650, sentiment could change, and traders may prefer to exit their long positions.

According to Bloomberg data, the Indian rupee closed 10 paise higher at 93.87 per dollar on Tuesday.

Rupee's weakness has perhaps been the biggest factor accelerating foreign capital outflows from the Indian stock market.

While several other factors will matter, if the domestic currency strengthens further, it could trigger a trend reversal in FII sentiment toward Indian equities.

"A major drag on the market now is the huge selling by FIIs despite the sharp correction in the market. The rupee's continued weakness is the main factor behind sustained selling by FIIs. Therefore, if some sort of stability is to emerge in the market, the rupee should stabilise first," VK Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.

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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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