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Indian indices surged almost two per cent on Monday aided by a drop in oil prices, after Iran, agreeing to curb its nuclear programme, struck a "historical" deal with western powers.
Traders trimmed their bearish bets, while foreign institutional investors (FIIs) emerged buyers after two days of net selling on hopes the agreement between Iran and the western countries would reduce risks in the oil-rich West Asia region, keeping a lid on prices.
Tensions between Iran and the US have been one of the reasons for elevated oil prices. Banks were the top gainers on expectations lower oil prices would help contain inflation and prompt the Reserve Bank of India (RBI) stop its monetary policy tightening.(GAINS APLENTY)
But investors remain doubtful about the market's strength, as uncertainty over the withdrawal of the Fed's monetary stimulus continues to loom over the markets.
"For the time being, the US-Iran nuclear deal has brought some sort of short-term relief to the market. It (the deal) is good for the markets in the long-term of course, but the short-term impact could last perhaps another two days because volatility will be elevated until some clarity emerges on the tapering of the Fed's QE3 programme," said Sankaran Naren, chief investment officer - equities, ICICI Prudential Asset Management.
The BSE Sensex rose 387.69 points, or 1.92 per cent, to close at 20605.08. The National Stock Exchange's Nifty surged 119.90 points, or 2.00 per cent, to close at 6,115.35.
The uncertainty among traders over the outlook reflected in the spurt in the NSE's Volatility Index (VIX) on Monday. VIX, a measure of traders' expectations of the near-term market risks based on options prices, rose five per cent to 21.05. After the expiry of the November series futures and options contracts, the focus is expected to shift to the outcome of the state elections - Chhattisgarh, Rajasthan, Madhya Pradesh, and Delhi - in the second week of December.
"Market is unlikely to see any significant move until the state elections or possibly general elections in May. Right now, there are no fundamental triggers to excite the market and even post state elections, it may not give a clear picture of its movements," said Taher Badshah, co-head of equities Motilal Oswal Asset Management.
