D-Street rebounds as US halts Iran strikes; Nifty jumps nearly 2%

Synopsis

Indian equities surged nearly 2% and the rupee gained as traders reduced bearish bets following the US halting strikes on Iran. However, tempered optimism persists due to a lack of reciprocal statements from Tehran and ongoing reports of Iranian attacks, suggesting continued market volatility.

Mumbai: Indian equities on Tuesday expectedly tracked a pan-Asian rebound in risk assets to climb nearly 2% while the rupee gained against the dollar, as traders slashed bearish bets after the US halted strikes on Iran in first apparent signs Washington was finally giving diplomacy a chance to help resolve the Gulf crisis.

Still, the conspicuous absence of reciprocal conciliatory statements from Tehran and reports of Iranian attacks tempered optimism on Dalal Street, said analysts, who don't expect volatility to subside just yet.

The NSE Nifty climbed 1.8% to 22,912.40, while the Sensex advanced 1.9% to 74,068.45. Both gauges have slumped nearly 9% since the start of the war. The rupee, meanwhile, settled at 93.86/$, up 11 paise from its previous close, LSEG data showed. It surged to an intraday high of 92.63/$ and traded in a wide range of 128 paise amid mild central bank interventions, traders said.

"The markets were oversold and news of a halt in attacks from the US triggered some short covering that led the rally," said Rajesh Palviya, head of technical and derivatives, Axis Securities. "However, it doesn't indicate volatility is over since there hasn't been a concrete resolution yet."

Agencies

Strait Still Closed

Asian risk assets, which took a cue from the overnight advance in US equities, climbed Tuesday. Hong Kong jumped 2.8% while South Korea gained 2.7%. China and Japan climbed 1.8% and 1.4%, respectively. Taiwan, however, declined 0.3%.

Palviya said not all the short positions are out of the system as investors await clarity on conflict resolution. Brent crude oil futures retreated about 10% on Monday but retraced to $98.9 on Tuesday after Iran denied talks with the US and launched fresh attacks.

Analysts said the continued closure of the crucial waterway that evacuates a fourth of the world's energy output capped outsized gains for Indian equities. "If there is further de-escalation from this point, then this could be a bottom for the market," said Dharmesh Kant, head of research, Cholamandalam Securities.

Energy supplies and the price of crude oil remain key monitorables in the rate and currency markets, too, analysts said. The rupee's near-term trajectory is linked to geopolitics and Tuesday's advancing trend could quickly reverse if hostilities continue.

"Some pullback in crude oil prices and easing geopolitical tone supported the rupee, and risk sentiments improved slightly. However, persistent equity outflows from foreign funds continue to pressure the rupee, and I expect a range between 93.65 and 94.25 on Wednesday," said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

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