Indian equities posted their sharpest gains in weeks after Democrats won control of both chambers of Congress in the US midterm elections and signs of a diplomatic opening between Washington and Tehran sent crude oil prices tumbling.
The Sensex and Nifty surged nearly 2 per cent on November 5 as the Democratic victory set off a wave of optimism across global financial markets. The Sensex opened 1,609.54 points, or 2.08%, higher at 78,910.94. Wall Street had closed sharply higher overnight, and the move in US equities set the tone for Asia. The Nifty gained 5.6% over five sessions, led by media, metals and realty stocks, while IT shares fell on AI-related concerns.
Oil is the link to Iran
The Iran connection runs through crude. India imports most of the oil it consumes, so a sharp fall in prices lowers the import bill, eases pressure on the rupee and inflation, and improves the outlook for corporate margins. Oil prices plunged 10% as the midterm results raised hopes that the Iran war could end. Oil futures fell more than 14% over the week as senior US and Iranian officials signalled openness to a diplomatic resolution.
That is a sharp turn from earlier in the year. In May, crude hovered around $114 a barrel as the conflict, which began in February, kept Indian benchmarks under pressure through repeated rounds of strikes, stalled talks and failed ceasefire extensions. Just before the election, Indian markets had gained over 1% on strong quarterly results, easing crude prices, hopes of US-Iran peace talks and foreign investor buying. One strategist, however, warned that the market had turned weak on reports of possible renewed US strikes on Iran after the midterms.
What the midterms change
Democrats take the majority in January, and the market read the result as raising the odds of a negotiated end to the fighting and more congressional scrutiny of the war. President Trump remains in office, and the Republican-controlled House sits until then, so the practical shift in policy is not immediate. The rally reflects expectations more than any change on the ground.
Not all positive for India
The picture for India beyond markets is mixed. Business Standard’s coverage carried the headline that India sees some trade relief and new risks after the US midterm elections, and a separate report said the results are unlikely to bring immediate H-1B visa relief, according to lawyers. The fall in IT shares during the rally also shows that the sector most exposed to US policy and AI disruption did not share in the gains.
For now, cheaper oil and a calmer geopolitical backdrop have given Dalal Street its strongest tailwind since the Iran conflict began. Whether it lasts depends on whether the diplomatic signals from Washington and Tehran turn into an agreement.