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Indian indices surged almost 2% on Monday aided by a drop in oil prices after Iran struck a historical deal with western powers, agreeing to curb its nuclear programme. Traders trimmed their bearish bets, while foreign institutional investors emerged buyers after two days of net selling on hopes the agreement between Iran and the top global countries would reduce risks in the oil-rich Middle East region, keeping a lid on prices.
Tensions between Iran and US had been one of the reasons for elevated oil prices.
Bank shares were the top gainers on expectations lower oil prices would help containing inflation and prompt the Reserve Bank of India to stop its monetary policy tightening.
But, investors remain doubtful about the market’s strength as uncertainty over the withdrawal of the Fed’s monetary stimulus continues to loom over the markets.
“For the time being, the US-Iran nuclear deal has brought some sort of short-term relief to the market. It (the deal) is good for the markets in the long-term of course, but the short-term impact could last perhaps another two days because volatility will be elevated until some clarity emerges on the tapering of the Fed’s QE3 programme,” said Sankaran Naren, chief investment officer – equities, ICICI Prudential Asset Management.
BSE’s Sensex rose 387.69 points or 1.92% to close at 20,605.08. NSE’s Nifty surged 119.90 points or 2.00% to close at 6,115.35.
The uncertainty among traders over the outlook reflected in the spurt in the NSE’s Volatility Index (VIX) on Monday. VIX, which is a measure of the traders’ expectations of the near-term market risks based on options prices, rose 5% to 21.05.
After the expiry of the November series futures and options contracts, the focus is expected to shift to the outcome of the state elections-- Chhattisgarh, Rajasthan, Madhya Pradesh, and Delhi-- in the second week of December.
“Market is unlikely to see any significant move until state elections or possibly the general elections in May. Right now, there are no fundamental triggers to excite market and even post state elections it may not give a clear picture of its movements,” said Taher Badshah, co-head of equities Motilal Oswal Asset Management.
