Lower crude, firmer rupee and easing volatility drive sharp rebound in Indian equities

The BSE Sensex rose 776 points, or 1.02%, to 76,835.8, while the NSE Nifty climbed 228.50 points, or 0.9%, to 23,995.9. Gains were more spectacular in the currency markets where the rupee, perilously close to its all-time low last week, climbed 66 paise to close at 95.91 to the US dollar.

Read more: FIIs increase PSU exposure, trim stakes in private banks

Bonds also rallied, with yields on the benchmark 10-year paper erasing last week's rise to settle at 6.77%. Bond yields and prices move in opposite directions.

Brent crude futures fell more than 9% to around $89 per barrel. Lower crude prices are seen as a positive for India, helping ease inflation concerns.

Room for a Rate Cut

Last week, the Sensex and Nifty fell 2.3% - their highest weekly fall since early May and March, respectively - after Brent crude futures rebounded and climbed above $100 for the first time since May in the wake of fresh conflict in the oil-rich region.

Investor confidence on Monday strengthened as easing Iran-US tensions pushed crude oil prices lower, reducing inflation concerns for India, according to Gaurav Garg, research analyst at Lemonn.

"Strong FPI inflows, a firmer rupee, and value buying in banking, auto and financial stocks further lifted the market, while optimism around Q1 FY27 earnings supported stock-specific gains. However, investors remained cautious ahead of this week's US Federal Reserve policy decision and upcoming RBI policy, which could influence market direction," Garg said.

Elsewhere in Asia, markets were mixed. China gained 1.15%, South Korea rose 0.9%, while Taiwan fell 0.05%. Hong Kong climbed 0.98%. The pan-European Stoxx 600 index was flat but on a rising note at the time of going to print.

At home, India's Volatility Index (VIX) fell 9.7% to 12.66, indicating easing volatility and improving risk appetite among investors following the rebound.

On the technical front, Nifty nearly reclaimed the 24,000 mark and closed above its 50-day exponential moving average, indicating improving short-term momentum. Sensex also formed a strong bullish candle, suggesting easing selling pressure, said Chandan Taparia, head of derivatives & technicals, wealth management at Motilal Oswal Financial Services.

Foreign portfolio investors net sold shares worth Rs 1,688 crore on Monday, while domestic institutional investors were buyers to the tune of Rs 2,329 crore.

Sectoral trends remained broadly positive, with media emerging as the top performer, followed by IT, realty, mid and small healthcare, financial services, auto, pharma, REITs and chemicals. On the other hand, oil and gas, PSU banks, private banks, construction, metals and cement were laggards.

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