Sensex soars over 900 points, Nifty gains 271 pts on global optimism; Tax reforms fuel FII interest

NEW DELHI: Indian equity markets staged a sharp recovery on Friday morning as global stock indices turned green, dusting off recent geopolitical cues. The BSE Sensex started at 74,742.65 points, up by 910.10 points, or 1.23 per cent. Similarly, the NSE Nifty 50 began at 23,432.70 points, advancing 271.10 points, or 1.17 per cent.

Ajay Bagga, a banking and market expert, noted that foreign institutional investor (FII) debt flows into India are undergoing a major structural transformation following the landmark June 5 policy ordinance. “By completely eliminating the 12.5 per cent long-term capital gains tax and the 20 per cent withholding tax on interest income for FII investments in government securities (G-Secs), New Delhi has effectively eliminated the single largest frictional drag on foreign bond returns”.

He added that global macro funds and active index trackers are already ramping up allocations, as India’s 10-year sovereign yield, now fully tax-exempt, stands out as one of the most lucrative investment-grade debt instruments in the world.

“Analysts project this regulatory pivot could draw up to $50 billion over the next two years, providing a vital cushion for the rupee and significantly lowering sovereign borrowing costs at a time when equity outflows have been persistent”, Bagga said.

The domestic momentum follows positive cues from the broader Asian landscape, where GIFT Nifty traded at 23,464.00, up 0.26 per cent, and the Nikkei 225 surged over 3 per cent to 66,230.00. The Hang Seng moved up 2.05 per cent to 24,747.00, while the Taiwan Weighted rose 2.41 per cent to 44,187.41.

In the West, Wall Street rallied sharply overnight with the Nasdaq gaining 2.5 per cent, supported by technology and AI-related optimism. However, Bagga cautioned that “Underneath the broader equity surge, deep-seated anxiety over underlying structural inflation and central bank policy pathing remains a heavy anchor for institutional asset allocators.”

Explaining the global shifts, Bagga said, “Geopolitical theatre took centre stage over the last 24 hours as a swift sequence of headlines sparked rapid, algorithmic shifts across trading desks. Volatility spiked after Donald Trump issued a fiery warning to Iran, only to pivot hours later by claiming a sweeping, historic diplomatic deal was ‘imminent.’ Tehran quickly threw cold water on the announcement, with Iranian officials issuing a firm denial that any such breakthrough had occurred”.

While the conflicting messages initially left foreign policy analysts scrambling, Bagga mentioned that “macro traders treated the rapid-fire updates as an invitation to unwind risk premiums, calculating that the mere mention of a potential deal reduces the immediate probability of severe energy supply disruptions in the Middle East”.

At the time of filing, commodity markets cooled, with Brent crude falling 1.48 per cent to $89.04 per barrel and crude oil slipping 1.42 per cent to $86.46 per barrel. Gold prices also eased slightly by 0.22 per cent to $4,203.64 per ounce.

Rajesh Palviya, Head of Research, Axis Direct also echoed the same sentiments. He noted that the global backdrop improved significantly overnight after indications of a possible diplomatic resolution between the US and Iran eased concerns over a broader conflict.

“This sparked a strong rally across US markets, with gains led by technology stocks, while Asian markets are also trading higher in response. More importantly for India, Brent crude has retreated sharply below the $90-per-barrel mark, reducing inflationary concerns and improving the outlook for risk assets.”

Market experts are now observing technical resistance levels closely to see if the gains will hold. Shrikant Chouhan, head of equity eesearch at Kotak Securities, noted that after the prior session’s gap-down and recovery, profit-booking was visible earlier. He observed that for day traders, the 23,300 and 74,200 levels act as immediate resistance zones, above which the market could move higher. (ANI)