After the initial decline on Monday morning, benchmark indices Sensex and Nifty bounced back during the day, registering an impressive recovery amid hopes of easing Middle East tensions.
Sensex jumped 787.30 points to settle at 74,106.85, and Nifty surged 255.15 points to 22,968.25 at the end of the trading day.
The broader market, except oil & gas, gained over one per cent as broad-based buying was seen in the last hour of the trading day. Small-caps and mid-caps gained 1.3 per cent and 1.5 per cent, respectively.
Understanding the Monday bull run
One of the major reasons for the optimism is the possible end to a pause in hostilities between the US and Iran.
Another possible reason for bulls returning to the market is the rise of the rupee. Rupee rose 13 paise to close at 93.05 (provisional) against the US dollar during the day, after closing at 93.10 in the previous session on Thursday.
Besides, there was also heavy buying in banking and IT shares, with the banking indices recording an impressive 2 per cent rise. The recent decline in banking stocks appears to have made the more attractive to investors.
Meanwhile, on the domestic macroeconomic front, India's services sector growth momentum rose at the softest pace in 14 months in March, mirroring the slowdown in new business intakes, a monthly survey said on Monday.
What lies ahead?
"This is purely a headline-driven market as investors remain on edge over the Middle East war. If the report about the peace plan solidifies, we could see Nifty rising towards the 23,300 level," Reuters quoted a market analyst as saying.
"The buy-on-dips trend seen in the last couple of sessions and encouraging provisional quarterly updates from companies also aided investor sentiment," the expert observed.
However, analysts expect further volatility ahead. “The potential for further escalation of the war is high in the next few days. The market will be keenly watching the response of crude prices to war-related events. If, by any chance, the Hormuz Strait is opened, the market will respond positively even if the conflict continues,” Economic Times quoted V.K. Vijayakumar, Chief Investment Strategist at Geojit Investments, as saying.
According to him, there is an opportunity for long-term investors in banking stocks which are attractively valued.
He pointed out that the correction in public sector banks was due to sustained FII selling, but their fundamentals remain strong. "Patient investors will be rewarded," he was quoted as saying.
March also saw Nifty Futures recording a sharp correction of over 12 per cent, making it the worst fall since the sell-off during the Covid pandemic. As the April F&O series opened, there have been large short bets in major sectors—banks and financial services, auto and FMCG.