Israel-Iran Ceasefire: Is It the Right Time to Book Profits in Gold and Shift to Nifty 50, Sensex Stocks?

Geopolitical Easing Brings Market Optimism

With Israel and Iran agreeing to a tentative ceasefire after months of escalating tensions, global financial markets have shown signs of relief. The de-escalation has led to a dip in traditional safe-haven assets like gold and US Treasuries, while risk-on sentiment is visibly returning to equity markets — especially in emerging economies like India.

The truce, brokered by the UN and supported by key global powers, has eased fears of a larger Middle Eastern conflict disrupting oil supplies and global trade. As a result, Indian benchmark indices — the Nifty 50 and BSE Sensex — have witnessed a steady uptick in recent sessions.

Gold Slides as Risk Appetite Returns

Gold, which had rallied above ₹70,000 per 10 grams in India at the peak of the Israel-Iran standoff, is now cooling off. The yellow metal dropped by nearly 3% in the last week and may see further correction if geopolitical calm continues.

“Gold’s recent rally was largely driven by geopolitical risk premium,” said Vibha Mehra, Senior Commodity Strategist at Motilal Oswal Financial Services. “With peace talks progressing, investors are taking profits off the table. The metal could test ₹66,000-₹67,000 levels in the short term.”

Though inflation and central bank policies remain important drivers, reduced war risk typically weakens gold’s appeal, redirecting funds toward growth-oriented assets like equities.

Nifty, Sensex Gaining Momentum

In contrast, the Indian equity market is buzzing with renewed interest. On July 2, both the Nifty 50 and Sensex posted gains of over 0.8%, signaling bullish undertones. Investor sentiment has been bolstered not just by geopolitical clarity but also strong domestic fundamentals — including resilient GDP growth, robust GST collections, and upbeat monsoon projections.

“The ceasefire removes one layer of uncertainty, which is always good for equities,” noted Rajeev Thakkar, CIO of PPFAS Mutual Fund. “If earnings growth in Q1FY26 aligns with expectations, we could see further upside in large-cap and select mid-cap stocks.”

Foreign Portfolio Investors (FPIs), who had been net sellers in May and June due to global risk aversion, have started turning net buyers this week, pumping ₹2,500 crore into Indian equities in just two sessions.

Sectoral Shift: From Safe Havens to Cyclical Plays

The equity rally is not uniform across sectors. Analysts are noticing rotation out of defensive sectors like FMCG and pharma into cyclical sectors such as banking, infrastructure, and auto.

“Banks, especially private sector lenders, are likely to outperform given lower credit costs and improving loan growth,” said Priyanka Bose, equity strategist at JM Financial. “We also like capital goods and select PSU stocks which benefit from domestic capex revival.”

Energy and metal stocks, which were weighed down by oil supply fears and global demand concerns, are also rebounding on hopes of stable commodity markets.

Is It Time to Exit Gold and Enter Equities?

While the market sentiment has shifted, advisors caution against completely exiting gold.

“Gold remains an important portfolio diversifier. Booking partial profits is advisable, especially if you entered at higher levels. But maintain at least 5–10% allocation in gold as insurance against renewed volatility,” suggested Ankur Maheshwari, CEO of wealth-tech firm Fintellect.

On equities, the advice is to enter selectively, avoiding overhyped stocks or those trading at unjustifiable valuations. Valuations in large caps are reasonable, but pockets of froth remain in certain mid and small caps.

Investor Outlook: Strategy Going Forward

With the geopolitical cloud lifting, investors can consider the following strategies:

• Book partial profits in gold, particularly if held as a tactical bet.

• Rebalance portfolios toward equities, especially Nifty 50 and Sensex constituents with strong earnings visibility.

• Focus on quality stocks in sectors likely to benefit from India’s domestic growth story — banking, capital goods, and infrastructure.

• Avoid panic selling or excessive optimism; global uncertainties like US rate decisions and crude oil dynamics still pose risks.

“Peace doesn't always guarantee a smooth ride in markets,” cautioned Devika Shah, MD at Axis Securities. “But it does open the door for more fundamental-driven rallies, which long-term investors should utilize.”

The Israel-Iran ceasefire is a significant development, both politically and financially. For Indian investors, it presents an opportunity to reallocate capital from defensive plays like gold to growth-oriented assets. While cautious optimism is warranted, the shift in sentiment may well mark the beginning of a fresh leg in the Indian equity market’s upward journey.