NEW DELHI: Domestic equity indices witnessed a gap-up start to Thursday’s session as the United States and Iran backed away from the brink of further conflict in the Middle East, boosting investor sentiment back home. Most of Asian markets were also trading in the green.

Softening crude oil prices also added to the positive mood on Dalal Street as India relies heavily on oil imports.

BSE benchmark Sensex was up 508.31 points at 41,236.05. Its NSE counterpart Nifty gained 153.85 points and was trading at 12,179.20. Broader market indices were trading in-line with their headline peers. Nifty Smallcap jumped 1.46 per cent to 5,968. Nifty Midcap added 1.14 per cent to 17,269.75 and Nifty 500 gained 1.12 per cent to 9,901.

Volatility barometer India VIX plunged 10.54 per cent to 13.99.

All sectoral indices were trading in the green on NSE. Nifty PSU Bank was the biggest gainer, up 1.84 per cent. Nifty Auto, Nifty Media, Nifty Realty and Nifty Metal were among other gainers.

In the 30-share pack Sensex, IndusInd Bank was the biggest gainer, up 2.19 per cent at Rs 1490.75. SBI, up 2.02 percent at Rs 326.30 and ICICI Bank, up 1.75 percent at Rs 535.05, were among other major gainers.

Top factors behind the rally on D-Street:

Trump avoids escalating Iran crisis
US President Donald Trump’s soothing tone in an address from the White House helped the sentiments back home. Trump said the US did not necessarily have to respond militarily to the Iranian attacks on military bases housing US troops in Iraq overnight. He added no Americans were harmed in the strikes.

Trump stopped short of making any direct threat of military action but said the United States “will immediately impose additional punishing economic sanctions on the Iranian regime” in response to what he called “Iranian aggression.”

Oil prices sink 4%, lowest since mid-Dec
A plunge in oil prices in the international markets cheered domestic investors. Oil now sits cheaper than it was before the killing of the Iranian commander, Qassem Soleimani, in Baghdad, a strike that raised fears of an escalating regional conflict.

Brent futures nursed overnight losses of 4% to sit at $65.44 per barrel, near the cheapest since mid-December.

India is the third largest importer of oil globally. It relies for over 80 per cent of its domestic use of petroleum on imports and a cheaper oil bodes well for it.

Rupee rebounds sharply
Domestic currency opened with gains on Thursday against the US dollar amid ease in global tensions. Rupee was up 23 paise or 0.33 per cent at 71.47 per dollar.

A stronger rupee helps in making imports cheaper for India, which in turn is important for keeping fiscal deficit in check. A media report on Wednesday, quoting government sources, said fiscal deficit could widen to 3.8 per cent of gross domestic product in the current fiscal year, breaching the target of 3.3 per cent.

Hopes of better-than-expected Q3 show
Investors are also hopeful of a better quarterly earnings from India Inc this time, especially from certain sectors like banking, IT and FMCG.

“For banks, the corporate tax cut will pan out this quarter because a lot of private banks had provisioned last quarter and their result will be extraordinary this time. So the likes of HDFC Bank, ICICI Bank, IndusInd Banks and Axis Bank will come out with a very good result,” said AK Prabhakar, Head of Research at IDBI Capital.

He also has high hopes from IT and FMCG but said there will be moderate earnings from auto firms but that is already factored in the prices.

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