Stock Market Rally: Nifty Rises Above 25,200, Sensex Up Over 900 Points — Key Drivers Behind Advance

India's benchmark indices rose over 1% recovering from the 1% decline in the previous session, amid positive global cues and hope for easing tension between Iran and Israel. Nifty rose above 25,200, while Sensex was up over 900 points. The broader segment of the market was also positive, with the Nifty Midcap 100 rising 1.16% and Smallcap 100 index rising 1.25%.

"This rebound highlights solid buying interest at lower levels, reflecting underlying market strength despite global uncertainties," said Aakash Shah, technical research analyst at Choice Broking.

Nifty 50 rose 1.12% to 25,250.85 level, while Sensex was up 1.15% to 82,835.39.

"Investor sentiment remains cautious due to slow progress in US-China trade talks, President Donald Trump said he will set unilateral tariff rates within two weeks, a 0.5% decline in US index futures, and rising geopolitical tensions in the Gulf region,” said Vikas Jain, head of research at Reliance Securities.

According to Jain, the overall trend remains bullish as long as the index holds above its key support level of 24,750–24,700, with short-term dips offering potential buying opportunities.

Volatility index VIX fell over 1.33% on Tuesday.

US President Donald Trump announced that Israel and Iran had agreed to a tentative ceasefire that would begin around midnight Washington time on Monday. His announcement came just hours after Iran fired missiles at the Al Udeid Air Base in Qatar, where US Central Command has its regional headquarters, after promising it would respond “proportionately and decisively” to the weekend bombing by US forces of three nuclear facilities.

However, Iranian Foreign Minister Abbas Araghchi later clarified that no "agreement" on any ceasefire or cessation of military operations had been concluded, though Iran was willing to halt military actions if Israel stopped its strikes by 4 a.m. local time. Soon after this, sirens sounded across Israel as Iran launched a fresh strike on southern Israel. Israel's Beer Sheva has been hit by missile.

Despite the ambiguity, the market reacted positively to signs of de-escalation, reversing Monday’s heavy sell-off.

For more updates on Iran-Israel war click here.

Wall Street ended the session on Monday in green with S&P 500 closing 0.96% higher at 6,025.17. Nasdaq 100 index ended 1.06% up at 21,856.33 and Dow Jones Industrial Average rose 0.89% at 42,581.78.

European futures were trading 1.2% higher indicating a positive open, while Asian stocks were trading positive. US futures were also trading higher with S&P 500 futures rising 0.5% and Nikkei 225 futures up 0.8%. Japan's Topix rose 0.7% while Australia's S&PASX 200 was up 0.9%. Hong Kong's Hang Seng also advanced 1.9% and the Shanghai Composite rose 1%.

The ceasefire news led to a drop in oil prices, with Brent crude falling below $70, currently at $69.08 per barrel. The escalating conflict has heightened concerns over oil supply disruptions.

The Brent crude had slipped below $59 in May, the lowest level since February 2021. In the last two months, crude prices have tumbled to four year low amid US President Donald Trump's tariff wars.

The Indian rupee opened 64 paise stronger against the US dollar on Tuesday, trading at Rs 86.11 compared to its closing rate of Rs 86.75 on Monday.

Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, commented on the day's trading range, suggesting exporters to sit tight and importers to start hedging for the near term. He noted that rupee's trading range for the day is expected to be between 85.75 to 86.75.