Indian stock market benchmarks, the Sensex and the Nifty 50, clocked solid gains in intraday trade on Friday, June 20, despite escalating Israel-Iran tensions.
The Sensex opened at 81,354.85 against its previous close of 81,361.87 and rose over 900 points, or 1 per cent, to an intraday high of 82,297.36. On the other hand, the Nifty 50 opened at 24,787.65 against its previous close of 24,793.25 and rose more than 1 per cent to an intraday high of 25,078.35.
The gains were broad-based as the BSE Midcap and Smallcap indices rose by over half a per cent each during the session.
The overall market capitalisation of BSE-listed firms rose to nearly ₹447 lakh crore from nearly ₹443 lakh crore in the previous session, making investors richer by about ₹4 lakh crore in a single session.
Why is the Indian stock market rising?
The Indian stock market is witnessing healthy buying across segments. Here are four factors that seem to be behind the stock market rally:
1. Short covering after recent fall
Experts highlighted that a bounce in the Indian stock market is on expected lines as it has been subdued for the last three sessions. As the outlook of the Indian economy remains bright, investors seem to be buying stocks at cheaper valuations.
“Investors may be short covering on hopes of a truce between Israel and Iran. However, if the tensions escalate further, the market may again witness a selloff,” said SEBI-registered fundamental research analyst Avinash Gorakshkar.
2. Crude oil prices fall
Brent crude oil prices crashed over 2 per cent, boosting domestic market sentiment. Oil prices crashed even as tensions between Israel and Iran escalated further. Experts highlighted that crude oil is witnessing profit booking as the US delayed a decision on its involvement in the Israel-Iran conflict.
White House Press Secretary Karoline Leavitt on Thursday (June 19) said President Donald Trump will decide on the US role in the Iran-Israel conflict within two weeks.
Benchmark Brent Crude prices fell more than 2 per cent to near $77 per barrel. Experts pointed out that if crude prices remain below the $80 a barrel mark, it will not negatively affect the Indian stock market.
3. FPIs resume buying
Foreign portfolio investors (FPIs) have been buying Indian equities for the last three consecutive sessions amid a decline in the dollar index. On June 19, FPIs bought Indian equities worth ₹934.62 crore in the cash segment.
As the Indian economy’s macro outlook remains strong, experts believe foreign investors could be eying fairly valued segments of the stock market after the recent fall.
4. Technical factor
Experts say the domestic market is in a range, and a breakout on either side will decide its direction.
According to Shrikant Chouhan, the head of equity research at Kotak Securities, a successful breakout above 24,900 could take the Nifty 50 to 25,000-25,050.
“The strategy should be to take a long trade if Nifty crosses 25,000. Keep a stop loss at 24,800 for the same. On the other side, expect further weakness below 24,700; however, in that case, we need to keep a stop loss at 24,900 for the same. However, a close below 24,700 would be negative in the short term,” said Chouhan.
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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.
