Indian equities started off the first day of the new financial year on a positive note, staging a sharp rebound after recent losses, supported by improving global sentiment. Benchmarks opened firm and sustained gains through the session, with the Nifty50 closing higher by 1.6% (+348pts). Broader markets outperformed, as Nifty midcap and smallcap indices advanced 2.2% and 3.3%, respectively, reflecting improving risk appetite and bargain hunting at lower levels.

The primary trigger remained evolving developments around the US–Iran conflict. Comments from US President Trump indicating a potential halt to military action within the next few weeks. Additionally, signals from Iranian leadership expressing openness to dialogue, fuelled hopes of de-escalation. Reports of indirect communication between the two sides further reinforced this sentiment. However, while hopes of de-escalation have improved near-term sentiment, sustained de-escalation remains critical for a durable recovery—especially given lingering uncertainties around strategic chokepoints like the Strait of Hormuz.

This shift in sentiment was mirrored in global cues. Brent crude prices softened to ~$101/bbl, easing concerns around energy inflation and external vulnerabilities, while US bond yields declined, indicating a moderation in global risk aversion. These factors collectively provided a supportive backdrop.

On the domestic front, value buying emerged strongly following the sharp correction seen in the last few weeks. The rally was broad-based, with all sectors ending in the green except pharma, which witnessed mild profit booking. Auto stocks were among the top gainers, supported by healthy March sales numbers. Meanwhile, India VIX declined 10.3% to 25.01, indicating some cooling in near-term volatility after recent spikes.

Despite the rebound, foreign institutional investors’ relentless selling continues to remain a key overhang for Indian markets. For the financial year FY26, market performance remained mixed, with the Nifty ending down 3.6%, while midcaps gained 2.8% and smallcaps declined 4.9%—highlighting the uneven nature of the current market performance.

Going ahead, the continuation of today’s recovery will hinge on the progress and sustainability of de-escalation in the West Asia conflict. While recent developments have lifted sentiment, markets are likely to remain sensitive to incoming signals. Sustained easing of geopolitical tensions, alongside stability in crude prices, currency trends, and institutional flows, will be crucial in determining the durability of the recovery

Siddhartha Khemka – Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd