Hopes that the US and Iran will finalise a durable peace deal soon, as the US-Iran peace talks, as per media reports, may take place in Pakistan over the next few days, are driving markets higher globally.
On Tuesday, 21 April, the equity benchmark Sensex rose by nearly 800 points, or 1%, to an intraday high of 79,293, while the NSE counterpart Nifty 50 gained over 200 points, or almost 1%, to 24,571 during the session.
Both indices have been in the green since Friday, 17 April. Over these three consecutive sessions, the 30-share pack has risen by over 1,300 points, or 1.7%, and the Nifty 50 has moved up by nearly 400 points, or 1.5%.
Why is the Indian stock market rising?
The key driver behind the rise in the market is optimism surrounding the possible US-Iran peace talks.
According to Axios, US Vice President JD Vance may leave for Islamabad by Tuesday (21 April, US Time) morning to resume negotiations with Iran as the two-week ceasefire announced on 7 April will expire on 21 April.
The peace deal is expected to drive crude oil prices lower, eliminating key macroeconomic headwinds from the Indian economy and the stock market. Meanwhile, Brent Crude prices eased by nearly 1% on Tuesday amid hopes surrounding US-Iran peace talks.
“If the US-Iran peace deal happens, the macro worries will be put to rest because when the crude is higher, obviously you have concerns on the primary impact and the second-order impact of higher input prices,” Pankaj Pandey, the head of research at ICICI Securities, noted.
“The market can sustain this rally once a truce is finalised. I feel this rally has room to continue,” said Vinod Nair, Head of Research, Geojit Investments.
Another comforting factor is the decline in the intensity of foreign capital outflow. After offloading ₹1,25,736 crore from the Indian financial market in March, FII selling in April so far stands at ₹58,488 crore, as per NSDL data.
“FIIs are no longer major sellers, in my view. Their selling intensity seems to be coming down. Most of their selling in March and so far in April likely occurred in the initial phase, when there was limited visibility or clarity on a potential deal with Iran,” said Pandey.
Can a final US-Iran truce drive Sensex to 85k?
Market experts expect the Sensex and the Nifty 50 to rise further by about 10% from the current levels if the US and Iran declare a final end to their conflict.
“The stock market benchmarks may see around 10% gain from the current levels after a final peace deal announcement, as there will be limited macro worries. The expectations of pressure on Q1 margins for corporates will sort of come down. The Nifty 50 can touch 25,000-plus kind of levels,” said Pandey.
Ajit Mishra, SVP of Research at Religare Broking, sees the possibility of Sensex rising to the 85,000 mark.
“The Sensex can rise to 85,000 if the US and Iran agree to a final deal and we see a sharp cut in crude oil prices from $95 per barrel to the previous swing low of $86 per barrel,” said Mishra.
Nair said there could be a 2% to 4% earnings cut due to the crude oil price rise. If a peace deal is reached, the downside risk comes down.
“Even with a 2-3% earnings cut for FY27 and a 5% downgrade in valuation for India, we still believe the Nifty 50 can reach 27,000 by December. We remain positive and are suggesting our clients buy on dips as a daily strategy,” said Nair.
Nair expects Q1 earnings to be mostly in line, though expectations are more muted compared to the third quarter.
“The fourth quarter isn’t expected to be as strong due to the base impact. If there is an issue with earnings, that impact will likely be seen more clearly in the first quarter of FY27,” said Nair.
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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.
