Sensex, Nifty Recover as US-Iran Deal Eases Oil Risk

Indian equity benchmarks erased early losses Thursday, lifted by a US-Iran peace agreement that pushed Brent crude below $79 a barrel and cut the geopolitical risk premium that had weighed on markets for months.

The BSE Sensex opened down 111 points at 77,044 but swung to a 109-point gain by mid-session, trading at 77,265. The Nifty followed a similar path, recovering from a 27-point dip to trade 44 points higher at 24,133.

The trigger was a formal Memorandum of Understanding signed by President Donald Trump and Iran at a dinner in Versailles on Wednesday. The deal is expected to reopen the Strait of Hormuz, the chokepoint for about a fifth of global oil shipments.

"Investor sentiment has strengthened after the White House confirmed that US President Donald Trump has formally signed the Peace Deal Memorandum," said Ponmudi R, CEO of Enrich Money. "The agreement is expected to facilitate the reopening of the Strait of Hormuz, easing geopolitical risks, reducing energy-market uncertainty and improving global risk appetite."

Brent crude fell 1.66% to $78.23 a barrel, extending a decline that has accelerated since the deal was announced. Lower oil prices directly benefit India, which imports roughly 85% of its crude requirements, by trimming the import bill and easing pressure on the rupee.

The recovery capped a four-day rally that had already added 3,323 points (4.5%) to the Sensex and 924 points (4%) to the Nifty. Thursday's early dip looked like profit-taking after that run, traders said, before the oil news drew buyers back.

Not all stocks participated. Infosys, Tech Mahindra, HCL Tech, Tata Consultancy Services, Reliance Industries and Kotak Mahindra Bank were among the laggards on the Sensex. Trent, Bharat Electronics, HDFC Bank and Larsen & Toubro led the gainers.

Foreign institutional investors bought equities worth Rs 102 crore on Wednesday, exchange data showed, a modest inflow that suggests overseas funds are still testing the post-deal environment rather than committing heavily.

The broader market faces a cross-current. The US Federal Reserve, now led by Kevin Warsh, struck a hawkish tone at its latest meeting. The dot plot pointed to a possible rate hike in October, VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted. The US 10-year yield rose to 4.46%, triggering a sell-off in American equities on Wednesday.

Asian markets were mixed. South Korea's Kospi and Japan's Nikkei 225 traded higher. Shanghai's SSE Composite and Hong Kong's Hang Seng slipped.

For Indian markets, the oil-price channel is the most direct transmission mechanism from the Iran deal. Every $10 drop in crude cuts India's annual import bill by roughly $15 billion, according to industry estimates. The question now is whether the peace holds long enough for that math to play out through a full earnings cycle.