The BSE Sensex surged over 2,500 points while the Nifty 50 gained nearly 800 points in the past two sessions, driven largely by optimism over easing tensions in West Asia. However, this rally now faces the risk of reversal as markets reopen after the Ram Navami holiday.
No breakthrough yet
The United States has proposed a 15-point plan to end the conflict, including a ceasefire, curbs on Iran’s nuclear and missile programmes, and phased sanctions relief. However, Iran has rejected the proposal and instead put forward a five-point counter-demand, calling for an immediate halt to attacks, guarantees against future aggression, and broader recognition of its regional role.
With no agreement in sight and continued drone and missile activity in the region, experts believe markets may remain volatile or even decline in the near term. The gap between investor expectations and actual geopolitical developments remains a key concern.
Global cues remain weak
Asian markets have already reacted negatively, with declines seen in indices like Japan’s Nikkei, South Korea’s KOSPI, and Hong Kong’s Hang Seng. Meanwhile, foreign institutional investors (FIIs) turned marginal buyers in recent sessions, suggesting that the rally may have been driven more by short covering than strong conviction.
Oil prices a major concern
Crude oil remains the biggest variable. Prices have stayed above $100 per barrel, increasing pressure on import-dependent economies like India. Rising oil costs could push up inflation, weaken the rupee, and impact corporate profitability.
Sectors such as aviation, paints, and oil marketing companies may face pressure, while financial stocks could see cautious positioning. IT stocks, however, may offer some defensive support depending on global trends.
What to expect
With domestic markets yet to reflect the latest global developments, there is a risk of a sharp “catch-up” move when trading resumes. Elevated volatility indicators also suggest that investors are hedging against downside risks rather than betting on a sustained rally.
Overall, despite earlier optimism, the absence of meaningful progress in resolving the conflict points to continued uncertainty, which could weigh on market sentiment in the immediate term.
