The BSE Sensex added 677.55 points, or 0.84%, to close at 81,796.15, while the NSE Nifty advanced 227.90 points, or 0.92%, to settle at 24,946.50. The market capitalisation of all listed companies on the BSE rose by Rs 2.30 lakh crore to Rs 450.39 lakh crore.
The recovery was broad-based, with the IT index rising 1.6% and heavyweight financials gaining 0.8%, snapping a four-day losing streak. Index majors HDFC Bank and Reliance Industries climbed about 0.9% and 0.7%, respectively. Oil explorers ONGC and Oil India also edged higher by 2% and 0.5%, respectively, on the back of elevated crude prices.
Despite fresh missile strikes between Israel and Iran over the weekend, global equities held steady, and Indian shares mirrored the optimism. Here are the factors supporting Monday’s market gains:
1. Declining dollar supports emerging markets
The U.S. dollar slipped further on Monday, with the dollar index down 0.1% at 98.1. The greenback has lost over 9% so far this year against a basket of six major currencies, weighed by concerns over delayed trade agreements and geopolitical risk. The weakening dollar has been a tailwind for emerging market equities, including India. Exporter-driven dollar sales also helped stabilise the rupee, which was little changed on the day.“The uncertainty stemming from the Israel-Iran conflict has created a risk-off in global markets. The safe haven buying is keeping gold firm but dollar continues to be weak,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. “Interestingly there is no panic in equity markets.”
2. Crude prices muted after initial surge
Oil prices, which surged more than 7% on Friday following Israel’s preemptive strike on Iranian military assets, moderated slightly on Monday. Brent crude slipped 73 cents to $73.50 per barrel, while U.S. benchmark crude settled at $72.25.
The initial spike in oil came on fears that a wider conflict could choke the Strait of Hormuz, a critical oil shipping route. However, easing market concerns helped cool prices, offering some relief to India, which imports nearly 85% of its crude needs.
Even so, upstream oil companies gained, with ONGC and Oil India rising on expectations of better realisations. “Markets will be severely impacted only if Iran closes the Strait of Hormuz triggering a huge spike in crude. This appears to be a low probability event now,” Vijayakumar noted.
3. Global equity rally lifts sentiment
Indian markets also drew strength from a positive global setup. European markets were mostly higher, with Germany’s DAX up 0.2% and the FTSE 100 rising 0.3%. U.S. stock futures rebounded after an early dip, while Asian indices posted solid gains. Japan’s Nikkei 225 rose 1.3%, South Korea’s Kospi added 1.8%, and Hong Kong’s Hang Seng climbed 0.7%.
Economic data from China showing stronger-than-expected retail sales in May further lifted regional risk appetite. Analysts said the absence of panic in global equity markets, despite Middle East tensions and looming central bank meetings, reflected a broader resilience among investors.
4. Rally in IT and financial stocks drives D-Street rebound
Gains in IT and financial stocks helped offset caution stemming from the ongoing Israel-Iran conflict and acted as key drivers of Monday’s market rebound. The recovery was broad-based, with the Nifty IT index rising 1.6% and heavyweight financials climbing 0.8%, snapping a four-day losing streak.
Among financials, index majors HDFC Bank and ICICI Bank rose about 0.9% and 0.8%, respectively. IT services firms, many of which earn a substantial portion of their revenue from the U.S., also saw strong buying interest. Shares of Wipro, Infosys, Tech Mahindra, Coforge, and Persistent Systems rose between 1% and 2.3%.
“Despite ongoing geopolitical tensions between Israel and Iran, the market moved higher, supported by gains in large-cap stocks, as investors maintained their focus on long-term fundamentals in the time of volatile situations,” said Vinod Nair, Head of Research at Geojit Financial Services. He added that “the IT sector outperformed in anticipation of the upcoming US Fed policy meeting, which is expected to provide further clarity on the interest rate outlook.”
5. Positive technical set-up fuels Nifty momentum
Benchmark indices also received a technical boost as key levels were reclaimed, signalling potential for further upside. The Nifty staged a sharp rally after reclaiming the 21-day exponential moving average (EMA), having found support at the recent consolidation low during Friday’s session.
“The Nifty witnessed a sharp rally as it reclaimed the 21-EMA after a brief dip below it,” said Rupak De, Senior Technical Analyst at LKP Securities. “The index appeared fairly oversold on the hourly chart, and the weak FII long-short ratio of around 20% in index futures set the stage for the smart recovery that Nifty has just experienced.”
De added that while a steep directional move is unlikely ahead of the U.S. Fed’s policy commentary, “a rally towards 25,350 looks highly probable once Nifty reclaims the 25,000 mark. On the downside, support is placed at 24,850.”
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