Why stock market is rising today? Key factors

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1) Hopes for Iran-US war de-escalation

2) Global markets rally

3) Valuation comfort

4) Bond yields decline

5) Oil prices fall

Bears still hiding behind the bulls?

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Indian stock markets sharply rebounded on Wednesday, with Sensex and Nifty surging around 1.6% each on the first day of the financial year 2027, as hopes for a sooner end to the Iran and US-Israel war, among other factors, cheered investors.In the morning, Sensex surged as much as 2,000 points and Nifty crossed 22,900. However, the benchmark indices then erased some gains. Sensex closed 1,187 points higher at 73,134, while Nifty rose 348 points to end the session at 22,679. The sharp rally in stock markets added around Rs 10 lakh crore to the total market capitalisation of all companies listed on BSE to Rs 422 lakh crore.Trent, IndiGo, Adani Ports, Bharat Electronics, State Bank of India (SBI), Zomato-parent Eternal and Larsen & Toubro (L&T) were among the top gainers on Sensex, surging around 4-7%. Bucking the trend, NTPC and Sun Pharma shares dropped 1% to close as the top losers on the benchmark index.Among the sectoral indices on NSE, Nifty PSU Bank and Nifty Media rose nearly 4% to emerge as the top gainers. Nifty Pharma however dropped 1%, bucking the trend. Around 2,936 stocks advanced on the stock exchange, while 283 declined and 103 remained unchanged. This came as India Vix, which measures volatility in the markets declined around 11%.Investors now increasingly hope for an end to the raging war soon. US President Donald Trump said the country could end its military attacks on Iran within two to three weeks and Tehran did not have to make a deal as a prerequisite for the conflict to ease. "We'll be leaving very soon," Trump told reporters at the White House on Tuesday.Iranian President Masoud Pezeshkian meanwhile said that the country had the "necessary will" to end the ongoing war with Israel and the United States, but was seeking guarantees that the conflict would not be repeated."We possess the necessary will to end this conflict, provided that essential conditions are met - especially the guarantees required to prevent repetition of the aggression," Pezeshkian said in a phone conversation with the president of the European Council, according to a statement from his office, reiterating a key demand of Tehran's. Notably, Iran has repeatedly denied claims by Trump that the country is engaged in ceasefire talks.US Secretary of State Marco Rubio said that Washington could see the "finish line" in the Iran war and the United States will have to reexamine ties with NATO after the conflict. This comes as the war, which has entered its fifth week and has fired up oil prices, rattled global markets in March.Following the de-escalation hopes, global markets rallied sharply. All three major US indexes rallied after the Wall Street Journal reported on Monday that US President Donald Trump told aides he was willing to end the military campaign against ‌Iran, even if the Strait ⁠of Hormuz ⁠remained largely closed.The S&P ⁠500, Nasdaq and Dow Jones Industrial Average recorded their biggest one-day gains since May 2025. S&P 500 jumped nearly 3% on Tuesday, while the tech-heavy Nasdaq gained around 4%. Dow Jones Industrial Average meanwhile rose 2.5%.Asian markets also rallied sharply on Wednesday, with Japan’s Nikkei soaring nearly 5% and South Korea’s Kospi surging nearly 8%. China’s Taiwan Weighted jumped more than 4% and Shanghai Composite rose over 1%, while Hong Kong’s Hang Seng gained more than 2%.European markets also surge up to 2%Today’s sharp surge comes after a massive selloff in March that wiped off significant sums of money from Indian stock markets. Nifty crashed around 11% in March as the rising hostilities in the oil-rich Middle East led to the prolonged closure of the Strait of Hormuz, triggering a massive rally in oil prices and leading to experts questioning the impact on India’s macroeconomics.After the sharp correction, some analysts noted that Nifty has fallen below its historical averages, which may hint at fairer valuations than what it had shot up to earlier. Elara Securities in its note said that historical patterns suggest limited downside for the benchmark index Nifty henceforth.The domestic brokerage cited data from the timeframes of seven major geopolitical conflicts in the past 25 years. It said that Nifty’s drawdown during the onset of conflicts has usually been capped at approximately 10%. Hence, historical patterns suggest limited downside for the benchmark index now, after the 11% crash in March.The market correction since the beginning of the war has brought Nifty's valuations down to fair levels, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments. He added that Nifty is now trading at about 19 times, which is lower than the last 10-year average of 22.4 times.US bond yields declined after seeing a sharp surge earlier. The benchmark 10-year yield, which falls when Treasury prices rise, slipped to 4.3%, falling for a second straight session. US two-year yields, which reflect interest rate expectations, were down 3 bps at 3.77%. This comes after the bond yields in March recorded their biggest gains in more than three months.Oil prices declined in the afternoon, after rising sharply in the morning. Brent crude futures tumbled nearly 4% to briefly drop below the $100 per barrel mark. WTI Crude meanwhile was trading at around $98 per barrel.This comes after oil prices neared $120 per barrel last month as Iran effectively shut the Strait of Hormuz as part of its retaliation against US-Israeli strikes that killed its former supreme leader Ayatollah Ali Khamenei.Despite the strong optimism in the stock markets, some caution is warranted. Foreign investors remained net sellers of Indian equities for the whopping 21st consecutive session on Monday, net selling Indian shares worth Rs 11,163 crore. While this does not reflect future activity, sustained outflows in recent sessions have weighed on investor sentiment. Additionally, rupee declined to all-time lows on Monday, breaching the historic 95-mark against the US dollar.Indian equity markets opened FY27 on a strong note, driven by improving risk appetite following US President Donald Trump's remarks hinting at a potential resolution to the West Asia conflict, said Vinod Nair, Head of Research at Geojit Investments. “Broad-based buying lifted benchmark indices, with mid- and small-cap stocks outperforming large caps, aided further by a stabilising rupee and softening crude oil prices. Sectoral rotation from defensives toward cyclicals was evident, with banking, chemicals, metals, and realty emerging as the key outperformers of the session,” he added.“Nevertheless, elevated bond yields and intraday volatility capped gains, keeping the overall advance measured rather than emphatic. Despite the constructive tone, markets may remain sensitive to sudden reversals in the evolving geopolitical landscape going forward,” the analyst explained.(With inputs from agencies)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)