Indian stocks advanced sharply on Monday, 3 August, as falling crude oil prices and a series of favorable economic, capital-flow, automobile and corporate updates released over the weekend strengthened demand for domestic equities.

The BSE Sensex closed 544.39 points, or 0.70%, higher at 78,639.03, while the Nifty 50 gained 390.70 points, or 1.60%, to 24,774.30. The Nifty had 44 gainers and six losers, while 21 of the 30 Sensex constituents advanced.

The gains were broad. The Nifty Midcap and Smallcap indexes rose 1.21% and 1.29%, respectively. IT, consumer-goods and public-sector bank stocks led the sectoral gains, while media stocks declined. ITC Ltd ended 1.9% higher, supporting the consumer-goods index.

The rally drew support from several developments that emerged after Friday’s close. Oil prices fell sharply, tentative diplomatic activity resumed around the Iran conflict and OPEC+ agreed to raise output. At home, the Reserve Bank of India (RBI) reported strong foreign-currency inflows, GST collections increased, automobile dispatches were robust and foreign portfolio investors returned to equities.

Oil drives the early gains

Brent crude fell about 4.8% to $83.70 a barrel after US President Donald Trump said talks involving Iran would take place on Monday. Trump had earlier called off a planned attack on Iran while seeking an agreement on Tehran’s nuclear program and the reopening of the Strait of Hormuz.

India imports most of the crude it consumes, making lower oil prices broadly positive for the economy. A sustained decline would reduce the import bill, ease pressure on inflation and the current account, and lower costs for businesses that rely on fuel or petroleum-based inputs.

The rupee ended nearly flat at 95.3375 against the dollar after briefly rising to a three-week high. Importer dollar demand and purchases by state-run banks offset the benefit of lower oil prices, while foreign inflows and RBI intervention during the previous week continued to provide support.

The response elsewhere was mixed. S&P 500 futures gained 0.5%, Nasdaq futures rose 0.6% and European shares advanced 0.4%. Asian markets moved in the opposite direction. Japan’s Nikkei fell 1% and South Korea’s Kospi lost more than 5%, as investors remained uneasy about the returns from heavy spending on artificial intelligence.

Oil prices also came under pressure after seven OPEC+ countries agreed on Sunday to raise their combined production quota by 188,000 barrels a day in September. The move completes the reversal of voluntary cuts announced in April 2023.

The increase may have less impact than the headline number suggests. Reuters reported that several OPEC+ production increases this year had existed largely on paper because the wars in Iran and Ukraine disrupted exports from the Gulf, Russia and Kazakhstan.

Nor is a diplomatic breakthrough assured. Iran’s foreign ministry said on Monday that no negotiations with the US were under way. Tehran said it was speaking with Oman about temporary safe passage through the Strait of Hormuz, but maintained that the waterway could not fully reopen while US military action continued. Oil prices are therefore responding to the prospect of de-escalation, not to a confirmed agreement.

RBI inflows support the rupee

The RBI said on Saturday that its temporary concessional foreign exchange swap facility had mobilized $40.816 billion through 31 July, nearly twice the $20.718 billion reported two weeks earlier.

Fresh Foreign Currency Non-Resident Bank deposits contributed $36.725 billion, or almost 90% of the total. Overseas Foreign Currency Borrowings added $2.575 billion, while External Commercial Borrowings accounted for $1.516 billion.

The central bank introduced the facility in June to attract longer-term foreign-currency inflows and strengthen India’s balance of payments. It lowers the currency-hedging cost for banks raising eligible overseas deposits and borrowings.

The additional inflows also give the RBI more room to contain abrupt moves in the rupee. The central bank was estimated to have sold between $8 billion and $9 billion over three trading sessions in late July, after the currency approached its record low of 96.96 against the dollar.

Foreign investors returned to Indian equities in July after four consecutive months of selling. National Securities Depository Ltd data showed net purchases of ₹20,200 crore, or about $2.1 billion.

That reversal recovered only a fraction of the roughly ₹2.54 trillion, or $26.7 billion, withdrawn from Indian equities during 2026 through the end of July.

The Nifty 50 gained 2.2% in July and the Sensex advanced 2.1%, giving both indexes a second straight monthly rise. The Nifty IT index climbed 16.8%, its strongest monthly gain in six years, as investors cut exposure to crowded Asian semiconductor and AI-linked trades and moved some money into India.

GST and auto sales add support

Gross GST revenue rose 15.4% from a year earlier to ₹2.112 trillion, or about $22.2 billion, in July, government data released on Saturday showed. It was the third-highest monthly collection since the tax was introduced in 2017.

Revenue from domestic transactions increased 10.1% to ₹1.447 trillion. Collections on imports rose much faster, climbing 28.8% to ₹66,511 crore.

After refunds, net GST revenue increased 15.8% to ₹1.812 trillion, or about $19 billion. Gross collections for the first four months of the fiscal year rose 10.1% to ₹8.429 trillion.

The figures were strong, though their composition was less emphatic. Import-related revenue grew almost three times as quickly as domestic receipts, suggesting that part of the increase reflected higher import values and the weaker rupee rather than domestic consumption alone.

Automobile companies also reported strong July shipments to dealerships.

Maruti Suzuki India Ltd sold 241,421 vehicles during the month. Domestic sales reached a record 200,123 units.

Mahindra and Mahindra reported total sales of 103,860 vehicles, up 26% from a year earlier. Domestic sport utility vehicle sales increased 20% to 60,048, while commercial-vehicle sales rose 23% to 25,204.

Industry estimates put domestic passenger-vehicle dispatches at between 465,000 and 470,000 units, about 33% above the year-earlier level and potentially the highest monthly figure on record.

These are wholesale numbers, measuring shipments to dealerships rather than retail registrations during the month.

Electric-vehicle sales were also strong. Tata Motors reported total passenger-vehicle sales of 63,760, up 59%, while electric-vehicle volumes more than doubled to 15,217.

Earnings give the rally more breadth

Corporate results added to the gains, though not every set of numbers was uniformly strong.

ITC Ltd rose as much as 4.1% before closing 1.9% higher after brokerages said cigarette volumes held up better than expected following tax increases. Quarterly profit fell 27% to ₹3,579 crore, or about $375 million, but the volume performance eased fears of a rapid shift toward illicit cigarettes.

Divi’s Laboratories gained after consolidated net profit rose 65.5% to ₹902 crore, or about $94.6 million. Revenue increased nearly 28% to ₹3,080 crore.

Urban Company climbed about 15% after quarterly revenue rose 44% to ₹528 crore, or $55.4 million. The company nevertheless reported a net loss of about ₹92 crore, or $9.7 million, compared with a profit a year earlier.

Bajaj Finance’s results remained in focus after the company reported a 28% increase in quarterly profit last week to ₹6,081 crore, or about $638 million. Assets under management grew 24%, while analysts pointed to stronger loan growth and better asset-quality indicators.

Other weekend data added to the positive tone.

Mumbai recorded 13,617 property registrations in July, up 8.3% from a year earlier and the strongest July performance in 14 years.

India’s renewable electricity generation rose 30% to a record 36.25 billion kilowatt-hours. Renewable sources accounted for 20% of total generation, while coal’s share fell to a one-year low.

The picture is not uniformly strong

Government bonds did not share in the gains seen in equities.

The yield on the benchmark 10-year bond rose two basis points to 6.855%, its highest level in more than a week, after Bloomberg Index Services deferred the inclusion of Indian government securities in its Global Aggregate Index.

Foreign investors had sold nearly $600 million of Indian bonds over the six sessions before Monday.

Manufacturing data also pointed to slower momentum.

The HSBC India Manufacturing Purchasing Managers’ Index fell to 53.5 in July from 54.2 in June, its lowest reading since August 2021. A figure above 50 still indicates expansion, but new orders grew at their second-slowest pace in more than four years and hiring was the weakest in 29 months.

There were some favorable details. Input-cost inflation eased to a five-month low and business confidence improved.

Even so, the survey suggests that strong GST collections, automobile shipments and capital inflows have not yet translated into a broad acceleration across the economy.

The RBI began its monetary policy meeting on Monday and is due to announce its decision on Wednesday. The central bank is widely expected to leave the policy rate unchanged at 5.25%.