Sensex, Nifty extend gains; what's next for the market?

Indian benchmark indices extended their gains on Monday, supported by easing geopolitical concerns in West Asia, a decline in crude oil prices and continued strength in the rupee.

The 30-share BSE Sensex pack climbed 736.38 points or 0.97 per cent to settle at 76,264.33. The NSE Nifty50 index advanced 231 points or 0.98 per cent to close at 23,853.90. The broader market also participated in the rally, with Nifty Midcap100 rising 1.29 per cent and Nifty Smallcap100 gaining 1.11 per cent.

Among the key contributors to the benchmark Sensex were Larsen & Toubro Ltd (L&T), Reliance Industries Ltd (RIL), Mahindra & Mahindra Ltd (M&M), HDFC Bank Ltd, Bajaj Finance Ltd, Infosys Ltd, Eternal Ltd and Maruti Suzuki India Ltd (MSIL).

Ajit Mishra, SVP, Research, Religare Broking, said, "Markets witnessed a strong rally on Monday, extending Friday's gains amid favourable global cues and easing geopolitical concerns. After opening with a sharp gap-up, the Nifty traded within a narrow range during the first half before witnessing some profit booking as the session progressed."

He added, "Sectoral participation remained firmly positive, with realty, auto, and metal emerging as the top gainers. Oil-sensitive segments such as aviation, paints, tyres, and cement also continued to attract buying interest following the sharp decline in crude oil prices. Broader markets participated actively in the rally, with both midcap and smallcap indices rising over 1 per cent each, reflecting a significant improvement in market breadth and investor risk appetite."

Mishra further stated, "The rally was primarily driven by optimism surrounding a preliminary peace agreement between the US and Iran, which significantly eased concerns over potential disruptions to global energy supplies. Brent crude prices declined sharply to around the $83 per barrel mark, providing relief from inflationary pressures. The strengthening of the rupee and a decline in domestic bond yields further supported sentiment, while broad-based buying in heavyweight banking and infrastructure stocks aided the upmove. However, participants remain watchful of foreign institutional flows and further developments related to the formalisation of the peace agreement."

Vishnu Kant Upadhyay, AVP (Research) at Master Capital Services, echoed a similar view. "Indian markets opened the week with strong gains — Nifty hit a three-week high and Sensex a four-week high, before some profit-booking trimmed gains from the peak. The key trigger was news of a peace deal between Iran and the US, which sent crude prices down over 4 per cent," he said.

Upadhyay added, "A second straight day of rupee's strength and US 10-year yields holding below 4.5 per cent added to the positive mood. Sectorally, banking, financial services, OMCs, paints and tyre stocks remain best placed to benefit from lower crude oil prices."

What lies ahead?

Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services Ltd (MOFSL), stated, "Going forward, investors will closely track the formal signing of the US-Iran agreement scheduled on June 19, crude oil price trends, FII flow dynamics and evolving inflation expectations for further market direction."

Nifty outlook

According to Nilesh Jain, VP and Head of Technical and Derivative Research at Centrum Finverse, Nifty50 faces a crucial hurdle near the 24,000 mark despite reclaiming an important short-term support level.

"Nifty opened on a gap-up note but encountered strong resistance near the 24,000 mark, which continues to act as a key psychological hurdle. The index has reclaimed its short-term 50-DMA, placed around 23,750, which is now expected to provide immediate support. A decisive breakout above 24,000 could trigger the next leg of the rally towards 24,300. The broader market structure remains positive, and a buy-on-dips strategy is advisable as long as the index holds above 23,200. Meanwhile, India VIX declined 3 per cent to close near the 14 level, and any further moderation in volatility is likely to strengthen the positive market sentiment," Jain said.