The 30-share pack jumped 1,074 points, or 1.42%, to close at 76,488.96, while the Nifty 50 surged 1.32% to end at 24,031.70.
Among the sectoral indices, Nifty Bank, Financial Services, and Private Bank surged more than 2% each.
Optimism over a potential US-Iran deal Optimism over a potential US-Iran deal boosted market sentiment, helping it to break the range it had been trading in last week.
Crude oil prices tumble Brent crude, the international crude oil benchmark, dropped over 5% to trade below the $98 per barrel in Monday's session, offering a huge relief to market sentiment.
A sharp and sustained decline in oil prices will ease the strain on India's fiscal position, decrease the risk of inflationary pressure, and improve the prospects of monetary easing.
Stock market today: The Indian stock market witnessed a sharp across-segment buying on Monday, 25 May, with the benchmarks, the Sensex and the Nifty 50, rising more than 1% each.
The 30-share pack jumped 1,074 points, or 1.42%, to close at 76,488.96, while the Nifty 50 surged 1.32% to end at 24,031.70. The BSE 150 Midcap and the BSE 250 Smallcap indices rose by 0.80% and 1.22%, respectively.
Bajaj Finance, HDFC Bank, Eternal, and Larsen and Toubro ended as the top gainers in the Sensex index, while Infosys, TCS, and Hindustan Unilever ended in the red.
Among the sectoral indices, Nifty Bank, Financial Services, and Private Bank surged more than 2% each. Nifty PSU Bank vaulted 3%. Nifty Auto, Realty, Oil and Gas, and Consumer Durables rose more than 1% each.
Nifty FMCG (down 0.18%) was the only sectoral index that ended in the red.
Investors earned about ₹6 lakh crore in a single session as the overall market capitalisation of BSE-listed firms rose to nearly ₹469 lakh crore from ₹463 lakh crore in the previous session.
What drove the market higher? Let's take a look at some key factors behind the rise in the stock market:
1. Optimism over a potential US-Iran deal Optimism over a potential US-Iran deal boosted market sentiment, helping it to break the range it had been trading in last week.
According to reports, US President Donald Trump on Saturday said there was significant progress towards a peace deal with Iran and confirmed that the agreement would reopen the Strait of Hormuz, a critical waterway through which one-fifth of the global oil exports take place.
Trump, however, later said that the US will not rush into any deal, and the US blockade on Iranian ships in the Strait of Hormuz would continue until an agreement is signed.
While there is still no clarity on the terms and conditions of the deal both countries will agree on, as well as the timeline for a potential deal, markets are rising on hopes that the worst of the Middle East conflict is behind.
2. Crude oil prices tumble Brent crude, the international crude oil benchmark, dropped over 5% to trade below the $98 per barrel in Monday's session, offering a huge relief to market sentiment.
A sharp and sustained decline in oil prices will ease the strain on India's fiscal position, decrease the risk of inflationary pressure, and improve the prospects of monetary easing.
“We are starting the week on a positive note. Crude has dipped by $5 to below $100 on expectations that the US and Iran are close to a deal. The market will wait and watch for clarity and certainty since many similar expectations have been belied since the start of the war. If this expected deal holds and crude drifts down, that can turn out to be a turning point for the market,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
3. Rupee rises further As per PTI, the Indian rupee rose 35 paise to close at 95.25 against the US dollar on Monday, amid hopes of a potential resolution to the US-Iran conflict. Investor confidence also received a boost from recent comments by Reserve Bank of India (RBI) Governor Sanjay Malhotra regarding the domestic currency.
Malhotra told Mint that the central bank will do “whatever is required” to ensure orderly price discovery in the forex market.
"The appreciation in the rupee from the recent low of 96.96 is a welcome trend. Stability in the currency is necessary to bring back the FPIs who have been in a sustained sell mode. The resilience of the market during this period of crisis is a hugely positive factor. This is a reflection of partly the economy’s strength, and partly the confidence of Indian investors," said Vijayakumar.
4. US dollar, bond yields decline The dollar index declined by 0.30%, while US 10-year bond yields crashed nearly 2% to 4.48% during Monday's session, improving investors' risk appetite for emerging market equities.
Can D-Street hold gains? While the stock market is witnessing strong gains, there are concerns that the domestic market may not see a broad-based and sustained rally because it is still early to assess the second and third-order impact of elevated crude oil prices on India's growth-inflation dynamics and corporate earnings.
Vijayakumar pointed out that for a sustained medium-term rally to happen, crude oil prices have to stabilise below the $90 per barrel mark, the rupee has to strengthen, and many other factors, like a decline in global bond yields and the AI trade running out of steam, should happen.
He said if the US-Iran peace deal happens and holds, and consequently crude declines to below the $90 level, that can turn out to be a turnaround for the Indian economy and markets. This development can stabilise the rupee, too, which in turn can incentivise FPIs to at least stop selling in India.
"The Q4 results have turned out to be better-than-expected. This can sustain after a temporary dip in Q1 FY27. Markets can surprise, anticipating potential positive trends," said Vijayakumar.
Ajit Mishra, SVP of Research at Religare Broking, said while the rally in Indian equities following optimism around a potential US-Iran deal is largely being driven by the hope of lower crude oil prices, easing inflation pressures, and improved global risk sentiment, the sustainability of the upmove over the medium term will depend less on geopolitics and more on domestic macro fundamentals.
"While softer oil prices could provide temporary relief to the rupee, bond yields, and inflation outlook, markets still face key challenges including weak earnings growth, expensive valuations, persistent FPI outflows, and slowing consumption trends," Mishra said.
"Any disappointment on the earnings front or renewed global uncertainty could trigger volatility again. Therefore, the current rally may continue in the near term, but a durable medium-term uptrend would require clear improvement in corporate earnings, stronger domestic demand, and stability in global liquidity conditions," said Mishra.
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