Indian stocks boom as guns fall silent in West Asian ceasefire; oil plunges, Hormuz opens

Bulls resurrected sentiment on Dalal Street with main indices surging 2-6 percent after an overnight ceasefire between US and Iran ignited widespread buying on Wednesday. Oil crashed, bond yields dipped, metals rose and investors rejoiced the return of risk-on trade globally.

Conflict scarred West Asia saw US President Donald Trump, Israeli Prime Minister Benjamin Netanyahu and the Iran’s Islamic Revolutionary Guards Corps pulling themselves back from an Armageddon after the much-discussed ceasefire came into effect immediately.

Consequently, equities soared as Crude oil prices tumbled as much as 18 percent on news that the Straits of Hormuz will be open for business within a fortnight and that stranded oil tankers will move.

The benchmark Nifty gained 889 points to a 5-week high as investors bought into beaten down valuations and traders scrambled to cover short positions. The rupee gained vs the US dollar.

Local stocks and the currency have been worst performers during March as India imports 85 percent of its energy needs with a large percentage coming in via Hormuz. A week before saw the Nifty plunge to a 1-yr as it corrected 15 percent from its most recent peak.

Buying frenzy was visible on as investors clawed back 25 lakh crore rupees in market capitalization.

The rally was across the board: paint makers, tyre companies, oil retailers, airlines, real estate players, metal producers and auto giants breathed a sigh of relief as rocketing energy costs declined and fractured supply chains healed. Major stocks rose as much as 10 percent.

PLAN OF ACTION

Iran and the US have agreed to a 2-week truce as negotiators hammer out peace. For those investors who did not participate in the last four sessions of gains, not much is lost. Markets remain in a buy zone and they can focus on building new portfolios or add to existing ones.

Analysts suggest piecemeal purchases via monthly SIPs in the following equity schemes:

* ICICI Prudential Dividend Yield Fund

* HDFC Flexi Cap Fund

* Kotak Multi cap Fund,

* Invesco Small Cap Fund

* Bandhan Large and Midcap Fund

Investors should have a large-cap bias and an investment horizon of five to seven years.