Benchmark indices rebounded on Thursday, rising more than 1 per cent after three sessions of sharp losses, as global risk appetite improved despite continued tensions in the Middle East.
After closing at its lowest level in nearly 11 months in the previous session, the Sensex rose 900 points, or 1.14 per cent, to end at 80,016, while the Nifty 50 gained 285 points, or 1.2 per cent, to close at 24,766.
In the preceding three sessions, both indices had declined around 4 per cent as the escalating conflict between Iran and the United States pushed oil prices higher and triggered concerns around inflation and economic growth.
Most Asian and European markets also advanced, tracking a positive close on Wall Street overnight.
However, geopolitical tensions remained elevated. Iran vowed to intensify retaliation against US strikes and avenge the sinking of one of its warships as the conflict entered its sixth day.
All NSE sectoral indices ended higher except information technology, which slipped 0.6 per cent. The India VIX volatility index cooled 15 per cent to 17.9.
A large part of the index gains came from heavyweight Reliance Industries, which rose 3.3 per cent after falling nearly 5 per cent over the previous three sessions. Engineering major Larsen & Toubro rebounded 4 per cent after shedding nearly 10 per cent in the preceding two sessions.
Analysts said the recent correction in several stocks appeared overdone, prompting value buying.
Market breadth improved, with 2,749 stocks advancing and 1,515 declining on the BSE.
Brent crude oil prices hovered around the $83-per-barrel mark.
Experts said the recovery remains fragile as the situation in West Asia continues to be uncertain. Investors may need to brace for further volatility as disruptions to energy supplies could complicate the global inflation and interest rate outlook.
For India, the stakes are particularly high given its heavy dependence on imported energy. The country imports over 80 per cent of its crude oil requirements, with more than half sourced from the Middle East. Six of India’s top 10 crude suppliers are from the region. Besides oil, Qatar and the UAE are key LNG suppliers, raising concerns after reports that Qatar shut its largest gas plant.
“In periods of heightened uncertainty, such as war-like situations, investors typically move capital toward safer assets, usually in developed markets. As a result, emerging markets tend to witness selling pressure,” Pratik Gupta, CEO and Co-Head, Kotak Institutional Equities, said.
Analysts also said shipping firms, oil producers, and insurers have adopted a cautious wait-and-watch approach amid reports of damaged vessels in the region.
“Strait of Hormuz flows and any potential communication on the Strait by the US, Iran, China and GCC countries, as well as developments in the broader conflict, are now the most important variables to watch in energy markets,” said a note by Goldman Sachs earlier this week.
After the selloff, India’s valuations are now below their long-term averages; however, experts believe they are still not “cheap”.
“At present, India’s valuations are not exactly cheap. The market is trading at close to 20 times one-year forward earnings — lower than earlier levels but still relatively expensive on a broad basis. Valuations would begin to look attractive if the market were about 10–12 per cent lower, which would translate to roughly 18 times forward earnings,” said Gupta.
 "Sensex, Nifty rise over 1% after three-day rout as global cues improve")
