Trump Step Back on Iran Pacifies Nervous Market
India's equity indices rebounded 1.3% on Friday, recouping losses made in the last three sessions on a relief rally sparked by US President
Donald Trump
putting on hold a plan that may have led to American involvement in the Israel-Iran conflict.
The rebound helped the
Sensex
and
Nifty
erase all recent losses and notch up gains for the week. The Nifty closed above a key level at 25,112, up 1.3% or 319 points over Thursday's close. The BSE Sensex closed at 82,408, up 1.3% or 1,046 points. Both indices, which fell about 0.6% over the past three trading sessions, gained 1.6% for the week.
'In the past two to three days, there hasn't been any significant escalation in the Iran-Israel conflict that could choke global trade,' said Siddarth Bhamre, head of institutional research at Asit C Mehta Intermediates. 'Receding concerns prompted some buying interest in the markets.'
Elsewhere in Asia, South Korea gained 1.5% while Hong Kong and Taiwan rose 1.3% and 0.2%, respectively. Japan ended 0.2% lower after the country's core inflation hit a two-year high, boosting the chance of interest rate increases. China declined 0.1%. Trump said he will decide on US participation in the Iran-Israel conflict in two weeks.
This was seen as the US President taking a step back from recent remarks that indicated the US was likely to take military action against Iran. It came as a relief to markets that were nervous about the likelihood of a wider conflict.
Back home, the Volatility Index (
VIX
)—the market's fear gauge—fell 4.1% to 13.67 on Friday, indicating traders expect lower risks in the near term.
All sectoral indices closed higher on Friday. The Nifty Realty gained 2.1%, and the PSU Bank Index rose 1.6%. The Bank Nifty moved 1.2% higher while private bank, auto and metal indices advanced over 1% each. 'Given that the benchmark was closing lower in the past three sessions and the fall in the broader market yesterday, a rebound was likely, which pushed the market higher,' said Vikas Jain, head of research at Reliance Securities.
The benchmark Nifty is holding at the support level of 24,700 and is expected to test 25,200 in the next few weeks.
The Nifty Mid-cap 150 and the Small-cap 250 indices rose 1.3% and 0.6%, respectively. In the past week, the mid-cap index shed 0.7% while the small-cap index fell 1.7%. Of the 4,094 shares traded on the BSE, 2,463 advanced, while 1,484 declined.
Foreign portfolio investors (FPIs) bought shares worth a net Rs 7,941 crore on Friday. This included purchases by global passive funds on account of FTSE rebalancing and a Sensex rejig. Their domestic counterparts sold shares worth Rs 3,050 crore. In June, overseas investors bought shares worth Rs 7,060 crore.
'The markets have not delivered any meaningful gains so far this year, so index-based returns are expected to be sluggish. However, it is seen to be a stock-pickers market,' said Bhamre of Asit C Mehta. 'Investors should be wary of buying, and not chase stock at any value.' Bhamre said timewise consolidations are expected to continue, with bouts of buying and selling activity and Nifty is facing a hurdle at 25,100-25,200 levels. Even if it crosses this threshold, a big surge is not likely as gains might come off amid ongoing geopolitical tensions.
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