India Stocks Rally as Iran-US Oil Deal Cools Prices

Indian stocks surged Monday after news of a US-Iran peace deal reopened the Strait of Hormuz to commercial shipping. The deal triggered a sharp drop in crude oil from $86 per barrel on Friday to around $83-84 in early trade. The Sensex jumped 1,293 points to cross 76,800, while the Nifty 50 added 388.5 points to reclaim the 24,000 mark. The India VIX fell nearly 4% to 14.19, signaling easing risk perceptions.

Nearly 80% of the 3,615 traded stocks on the BSE advanced. Realty and financial stocks led the gains. Banking stocks strengthened on short covering and valuation support, according to Dr V K Vijayakumar, Chief Investment Strategist at Geojit Investments. Pharma and healthcare were the only sectors to trade lower.

'The lower oil price changes India's economic outlook materially,' Vijayakumar said. He now projects FY27 GDP growth at 6.9% and CPI inflation at 4.6%, both improved from prior forecasts. 'The prospects for the Indian economy and stock market have turned for the better,' he said. The rupee should strengthen further, he added, which could help stabilize foreign portfolio flows.

The rupee opened with a bullish gap, trading near 94.67 against the dollar. Kaveri More, Commodity Technical Analyst at Choice Broking, said lower oil reduces India's import bill and eases the current account deficit. Inflation was already below the RBI's 4% target at 3.9% in May, she noted. The bigger unknown, she said, is the US Federal Reserve's policy decision due later this week. A hawkish tone could reverse the risk-on move.

The US Federal Reserve's policy decision due Wednesday is the next key catalyst. Markets will watch Chair Kevin Warsh's comments on the rate path.