Indian equities are anticipated to open with minimal change on Tuesday, as market participants exercise caution while awaiting more definitive details regarding the U.S.-Iran peace deal. This comes after benchmark indexes recorded significant gains in the previous session, fueled by initial optimism surrounding the geopolitical development.
U.S.-Iran Deal Drives Market Sentiment
The primary driver of current market sentiment is the U.S.-Iran peace agreement. U.S. Vice President JD Vance indicated on Fox News that President Donald Trump might release the full text of the agreement with Iran before Friday. The deal, which has been electronically signed by leaders from both nations, is slated for an in-person signing ceremony in Geneva on Friday.
This tentative peace deal, announced by U.S. President Trump on Monday, had a positive impact on global markets. President Trump declared the deal “now complete,” authorizing the “toll free opening” of the Strait of Hormuz and the immediate removal of the U.S. blockade of Iranian ports. Furthermore, the U.S.-Iran ceasefire is expected to be extended for 60 days, providing a window for negotiations on Iran’s nuclear enrichment program and the disposal of its highly enriched uranium.
Domestic Market Performance and Economic Indicators
On Monday, Indian benchmark indexes Sensex and Nifty each surged approximately 1 percent, extending gains from the preceding session. Concurrently, the Indian rupee strengthened, gaining 47 paise to close at 94.71 against the U.S. dollar.
Recent economic data from India presents a mixed picture. Government data released on Monday revealed that India’s trade deficit narrowed marginally to $28.21 billion in May, down from $28.38 billion in April. This reduction was attributed to higher exports, bolstered by a weaker rupee, which helped offset a portion of the import bill.
However, a separate data set from the Ministry of Commerce indicated an acceleration in India’s wholesale price inflation (WPI). The WPI rose to 9.68 percent in May from 8.26 percent in April, calculated under the new 2022-23 base. This increase was largely driven by soaring fuel costs, a direct consequence of the ongoing Middle East war.
Investor Activity and Global Market Overview
Provisional exchange data showed a notable shift in investor behavior on Monday. Foreign Institutional Investors (FIIs) became net buyers of Indian equities for the first time in 11 trading sessions, purchasing shares worth Rs. 200.05 crore on a net basis. Domestic Institutional Investors (DIIs) also demonstrated strong buying activity, acquiring shares to the extent of Rs. 3,189 crore.
Globally, Asian markets exhibited a mixed performance in cautious morning trade, as attention shifted to a series of central bank decisions anticipated this week. The U.S. dollar remained near a 10-day low, while gold saw little change at $4,310 an ounce after reaching a more than one-week high in the previous session. Oil prices edged up slightly, recovering after settling at a three-month low overnight.
U.S. stocks experienced a sharp rally overnight, with the U.S.-Iran peace agreement and tumbling oil prices boosting sentiment. The Dow Jones Industrial Average surged 0.9 percent to achieve a new record closing high. The tech-heavy Nasdaq Composite soared 3.1 percent, driven by continued optimism surrounding SpaceX and the artificial intelligence trade, while the S&P 500 added 1.7 percent.
European markets also closed modestly higher on Monday, although they pared some earlier gains that were sparked by the interim U.S.-Iran agreement to reopen the Strait of Hormuz. The pan-European STOXX 600 edged up by 0.2 percent. Germany’s DAX rallied 1.1 percent, and France’s CAC 40 gained 0.4 percent. In contrast, the U.K.’s FTSE 100 dropped 0.4 percent, as declining oil prices led to sharp falls in energy stocks such as BP Plc and Shell.
As Indian markets prepare for Tuesday’s open, the prevailing sentiment is one of measured anticipation. While the initial announcement of the U.S.-Iran peace deal provided a significant boost, investors are now seeking concrete details and the full text of the agreement before committing to further directional moves, suggesting a period of consolidation following Monday’s gains.
