Sensex Jumps 700 Points, Nifty Tops 25,200: 3 Reasons Behind the Market Rally

Indian markets witnessed a sharp uptrend during Wednesday's trading session as tensions between Israel and Iran took a breather. Benchmark indices, Sensex and Nifty, surged over 0.8% as crude oil prices reached pre-war levels.

On Wednesday, the BSE Sensex index concluded the session at 82,755.51 level mark, up by around 700 points or 0.85%. Whereas, the Nifty50 index breached the psychological 25,200 level mark, rising over 200 points or 0.80%.

Nearly all stocks from the BSE Sensex index were trading in green, except Axis Bank, Kotak Mahindra Bank and Bharat Electronics Ltd. (BEL). Titan, Infosys, Mahindra and Mahindra, Bharti Airtel and TCS were among the top gainers. Nifty IT was among the top-performing index, concluding at 39,046, indicating a surge of over 600 points or 1.64%.

Here are 3 reasons behind the stock market's rally-

1. Tensions Take a Breather in West Asia

Following a fragile truce, the ceasefire between Israel and Iran appears to be holding, with no major escalations in the conflict. Meanwhile, US President Donald Trump's Middle East envoy, Steve Witkoff, reportedly said that negotiations between Washington and Tehran were 'promising'. He also said that the US remains hopeful about the prospects for a long-term peace deal, as per a report by Reuters.

Adding to the overall optimism was the moderation in crude oil prices. The WTI oil futures were trading at $64.97 per barrel.

2. DII Confidence

Despite the dwindling confidence of foreign institutional investors (FIIs), domestic investors continued their buying spree. "While FIIs continue to withdraw capital, positive global cues are helping sustain domestic market momentum. Large-cap stocks, especially in IT and auto, are outperforming, aided by a strong dollar and improved risk appetite," said Vinod Nair, head of research, Geojit Investments.

On the macro front, the overall fundamentals remained strong owing to moderating inflation levels and RBI's recent liquidity infusion.

"Domestically, a favourable monsoon forecast, and moderating inflation are further underpinning the optimism. Although the prospect of new US tariffs presents a potential headwind, near-term market sentiment remains broadly positive," Nair said.

3. Technical outlook

Volatility eased on D-street as geopolitical tensions reduced. Nifty Vix, the fear gauge of the Indian stock market plummeted by nearly 5%.

"The ceasefire following the conflict between Israel and Iran has boosted confidence among bullish traders, who are now aiming to take the Nifty towards 25,750. Immediate resistance is placed at 25,350; a breakout above this level could extend the rally towards 25,750. On the downside, the 24,820–25,000 zone is likely to continue acting as a crucial support," said Rupak De, senior technical analyst at LKP Securities.