Stock market indices Sensex and Nifty surged about 1 per cent each in Thursday's trade as crude oil prices fell for the fourth straight session to hit a low of $72.64 per barrel on positive US-Iran peace talks, raising hopes foreign outflows may soon abate on improving domestic macros and reversing AI trade.

At 12.19 pm, Sensex was quoting at 77,803.18, up 760.38 points or 0.99 per cent. Nifty stood at 24,245.80, up 224.15 points or 0.93 per cent. Domestic stocks have inverse relationship with oil prices, which is working in the bulls' favour. 

"Oil prices and Nifty have an inverse correlation above the $90-100 per barrel mark; and, the current slump in prices is a potential positive for Indian equities given that the external sector situation will likely improve, as the oil import bill recedes," ICICI Securities said.

To recall, Indian stocks have been tested by episodic headwinds since its peak in September 2024 as concerns grew  over copious valuation premiums, low nominal GDP and earnings growth, an AI infrastructure stock euphoria sans India. This was amplified by geopolitical siege on the external sector, rupee's underperformance and relentless FPI selling. 

ICICI Securities said these concerns are showing signs of abating, or even reversing. 

"Valuations, from the peak of 24 times, have scaled back to 18 times; in parallel, the outlook for nominal profit growth is showing vigour, with inflation rising from the troughs alongside resilient corporate volumes and an improving capex cycle. The lower end of the valuation range currently provides a high-probability scenario of stock prices tracking accelerating nominal growth of 14–15 per cent, even without valuation re-ratings," ICICI Securities.

With crude oil futures falling below $73 a barrel level, the current account deficit (CAD) and balance of payment (BoP) deficits that were threatening India’s macro stability have ceased to be serious concerns, said VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited

"This will have positive implications for India’s GDP growth and inflation in FY27 and consequently for the market, too," he said.

Vijayakumar noted that the excessive volatility in the South Korean market continued with 10 per cent crash in one day and 5 per cent up move on another day. 

"The huge profitability of the semiconductor companies is attracting buyers on declines despite the concentration risks in this investment. FII flows will be influenced by this trend," he said.

After two years of subdued performance, the FY27 outlook is cautiously optimistic, underpinned by an anticipated pickup in Nominal GDP growth and attractive valuations, Ashika Institution Equities said this week.

"Geopolitics, the global AI frenzy and monsoon deficiency remain the key risks. We are constructive on two sectors – Defence and BFSI," it said.