Will ceasefire in the Middle East be enough to turn market sentiment bullish? Experts weigh in

Israel-Hezbollah Ceasefire: Indian benchmark indices have witnessed some recovery after a notable correction last month, helped by a decisive victory for the BJP-led NDA alliance in Maharashtra state elections.

This uptick has pushed the Sensex into positive territory for November, up over 0.5 per cent. Meanwhile, in another encouraging development, Israel and Hezbollah have agreed to a ceasefire, signalling a potential easing of global geopolitical tensions that have weighed on markets for some time.

Ceasefire in the Middle East

US President Joe Biden has announced a ceasefire agreement to end 13 months of conflict between Israel and Hezbollah along the Lebanese-Israeli border, effective Wednesday at 04:00 local time (02:00 GMT). Biden described the agreement as a step toward a “permanent cessation of hostilities.”

Israeli Prime Minister Benjamin Netanyahu cautioned that Israel would respond decisively if Hezbollah violates any terms of the deal. Meanwhile, Hezbollah, backed by Iran, has yet to issue a statement. The conflict, which began in October 2023, intensified in late September when Israel escalated airstrikes and launched a limited ground offensive.

Will easing Mideast tensions boost Indian stock market?

Now, the key question is whether easing tensions in the Middle East will be sufficient to turn the market sentiment bullish.

According to experts, while the de-escalation may offer short-term relief, a sustainable recovery will depend on a confluence of domestic and global factors.

Anupam Roongta, Market Analyst at Share.Market, highlighted the positive impact of the ceasefire news, stating, “It could help ease some of the global political tension in the global market. Reduced uncertainty may encourage investor confidence and provide short-term support to market sentiment.” However, he emphasised the importance of maintaining a long-term portfolio approach and focusing on fundamentally strong stocks with resilient business models to navigate potential volatility.

Jathin Kaithavalappil, Assistant Vice President at Choice Broking, echoed similar sentiments, noting that geopolitical stability could clear supply chain bottlenecks and adjust energy prices downward. “This brighter geopolitical setting can attract investors, making this an opportune time to be bullish about equities,” he added.

Balancing Optimism with Caution

Atul Parakh, CEO of Bigul, offered a more measured perspective, highlighting that while the ceasefire presents a positive development, the market remains influenced by other factors. He cited the recent NDA alliance victory in Maharashtra and structural stability from the central government’s renewed mandate as supportive elements. However, persistent inflation, potential US policy shifts, and foreign institutional investor (FII) outflows continue to pose challenges, he added.

“The market's recovery will hinge on concrete improvements in global economic indicators and a potential return of FII investments to the Indian market,” Parakh remarked, urging investors to temper immediate bullish expectations.

Ajit Mishra, Senior Vice President of Research at Religare Broking, pointed out that domestic factors, including disappointing earnings and sustained foreign investor outflows, have driven the recent market correction. While improving geopolitical conditions is a welcome sign, concerns over earnings deceleration remain a key hurdle for the markets, according to Mishra.

Trivesh, COO of Tradejini, said for India, such stability could create a favourable growth environment. However, he warned that escalating tensions in other regions, such as Ukraine and Russia, as well as the US veto on a Gaza ceasefire resolution, continue to add layers of uncertainty.

Despite the volatility, Trivesh pointed to promising market trends. “The Nifty 50, after an 11 per cent correction from its September peak of 26,277, has held the critical 23,000 support level. Similarly, the Sensex has rebounded 4 per cent from its lows after a 10.7 per cent correction from its all-time high of 84,250,” he said. He advised investors to take selectively bullish positions while closely monitoring the upcoming OPEC+ meeting on December 1, which could influence oil prices and broader market sentiment.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.