Sensex, Nifty: Why stock market is up today; will this rally sustain? Key risk

Benchmark stock indices Sensex and Nifty on Monday saw a gap-up start on hopes that a US-Iran deal is nearing finalisation. Stock analysts said valuations on Dalal Street have moderated, but are still not attractive. They remained cautious, noting that similar reports on a possible US-Iran deal in the past had failed to fructify. They also flagged the recent spike in US bond yields as a key risk for the market. For now, investors welcomed the developments in West Asia and the resultant drop in crude oil prices below the $95-a-barrel mark.

"Crude has dipped $5 to below $100 on expectations that 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 turning point for the market," said VK Vijayakumar, Chief Investment Strategist, Geojit Investment.

At 9.19 am, the BSE Sensex was trading at 76,276.46, up 861.11 points or 1.14 per cent. Nifty stood at 23,972.20, up 252.90 points or 1.07 per cent.

"Optically, the Nifty trades below 1 SD of its historical PE, based on headline Bloomberg multiples. However, we see 4-5 per cent downside risk to FY27 Bloomberg EPS estimates based on our assessment of individual company forecasts. We estimate the Nifty is trading at 19.3x FY27 PER, broadly in line with the long-term average of 19.5," Emkay Global said.

US-Iran deal

Several reports suggested Iran was ready to surrender enriched uranium as part of US proposed peace deal. The Prime Minister of Israel, Benjamin Netanyahu, in a X post said he spoke with Trump about the memorandum of understanding to reopen the Straits of Hormuz and the upcoming negotiations toward a final agreement on Iran’s nuclear program.

The US President, Donald Trump in a social media post said: "If I make a deal with Iran, it will be a good and proper one."

Trump though tapered some Street expectations, noting the negotiations are proceeding in an orderly and constructive manner, and that he had informed US representatives not to rush into a deal. "The Blockade will remain in full force and effect until an agreement is reached, certified, and signed," he said.

"Overall, market appears to be pricing in a post-war normalization in estimates and multiples, however, if hostilities continue and the SoH remains shut beyond the next 4-6 weeks, both earnings and valuation assumptions could come under pressure," Emkay Global said.

Crude oil prices 

Brent oil futures for August delivery tanked 5.52 per cent to $94.68 a barrel.

"Crude oil prices have corrected sharply, marking a significant pullback from recent highs above the $100–105 zone. The decline in oil prices is being viewed as a meaningful positive for India’s macroeconomic outlook, as softer energy prices help ease concerns around inflation, import costs and corporate profitability," said Ponmudi R, CEO of Enrich Money, a SEBI-registered online trading and wealth-tech firm.

Rupee appreciation

The Reserve Bank of India Governor Sanjay Malhotra  told Mint that the Indian rupee is not overvalued and may, in fact, be undervalued after the recent depreciation. We will do whatever is required to ensure orderly price discovery in the forex market, he said. Following this, rupee jumped 40 paise against the dollar at 95.20.

Asian markets rally

Japan's equity benchmark Nikkei 225 climbed 2.98 per cent, while markets across China, Korea and Hong Kong jumped up to 1.2 per cent.

"The near-term market outlook remains positive, supported by strong global cues, improving risk appetite, and continued domestic institutional support. The sharp rise in Gift Nifty indicates strong opening momentum, though resistance near higher levels may trigger intermittent profit booking. Sustained strength in banking and heavyweight stocks will remain crucial for extending the ongoing recovery trend," said Hitesh Tailor of Choice Broking.

Key risk for the market

Emkay Global said US treasuries has spiked, with the 10-year yields rising 6 basis points in the week ended June  and up ~65bps since the onset of the ME escalation on 28-Feb-26. The latest bond rout was driven by a combination of negatives, including high CPI print, continued US growth momentum, rising crude prices, a new Fed chair, and a global synchronous sell-off.

This has multiple negative implications for Indian equities.

"First, the US–India yield differential (10Y gilt) has narrowed to 244bps (vs ~450bps historical average), weaking the outlook for debt flows and adding incremental pressure on the rupee. Second, it provides another trigger for FPIs (equity) to reallocate toward developed markets. Third, higher global discount rates are negative for PE multiples, particularly in long-duration sectors such as Consumer and Internet, though the impact may play out over 3-4 quarters," Emkay said.

A silver lining is that US financial conditions have been resilient despite rising bond yields, limiting second-order damage to the US economy and borrowers.

"An early resolution of Iran conflict would provide some relief for US bonds, though other factors such as rising fiscal deficit and continued AI-led capex may limit the downside," Emkay said.