Indian equities in Tuesday’s trade after a positive opening amid a buoyant market mood extended their initial gains. At around 10:03 am, the NSE’s Nifty50 index climbed 0.96 per cent or 239.75 points to 25,211.65, while the BSE Sensex was up nearly 800 points or 0.97 per cent at 82,693.
Meanwhile, the Bank Nifty also traded higher by 1 per cent amid gains in heavyweights, including HDFC Bank, ICICI Bank and SBI among others.
So, as the dramatic developments in West Asia culminating in President Trump’s announcement of a ceasefire indicated that the worst of the conflict is over, Zee Business Managing Editor Anil Singhvi listed several reasons why the markets may see a big rally going forward.
Why Anil Singhvi anticipates good rally going forward?
Hopes of de-escalation in Iran-Israel tensions: After Iran and Israel agreed to a complete ceasefire, there are hopes of de-escalation in the geopolitical tensions. President Donald Trump early Tuesday (Indian time) announced on Truth Social that the two countries have agreed to a “Complete and Total CEASEFIRE” following to what he called as “THE 12 DAY WAR.”
The ceasefire agreement entails an initial 12-hour ceasefire period by Iran, followed by Israel also joining the ceasefire at the 12th hour.
Trump mentioned that upon the 24th hour, there will be an “Official END” to the war.
De-escalation in geopolitical tensions will boost the risk-on sentiment among investors.
Crude oil price steep fall:
Crude oil price dropped to its lowest in more than a week, post the announcement of the Iran-Israel ceasefire. At around 9:56 am, the WTI benchmark was down over 2.5 per cent to $66.78 per barrel.
Lower crude price bodes well for economies like India as the country imports most of its crude oil requirement.
Policy rate cut:
In its last RBI monetary policy meeting, the apex bank announced a surprise 50 basis points cut. A higher-than-anticipated policy rate cut boosts interest-sensitive consumption, thus supporting economic growth.
Benign inflation
India’s retail inflation in May, aided by the decline in food inflation, came in at the lowest level in over five years at 2.82 per cent. For controlling inflation, the apex bank raises interest rates which often slows down stock market activity.
Enormous liquidity in the banking system
On the sidelines of its bi-monthly policy outcome, the Reserve Bank of India in early June announced a sharp 100 basis points (1 per cent) cut in the Cash Reserve Ratio (CRR), lowering it from 4 per cent to 3 per cen. The decision was aimed at easing liquidity and boosting credit growth.
