Domestic markets staged a sharp rally on Friday, with the benchmark Sensex and Nifty posting their biggest single-day gains in more than two months after oil prices tumbled amid reports that the US and Iran had reached a provisional agreement to end their ongoing conflict.

The Sensex rose 1,695 points, or 2.3 per cent, to close at 75,528, while the Nifty50 advanced 461 points, or 2 per cent, to settle at 23,623. The gains were the strongest for both indices since April 8.

Friday’s rally also helped the benchmarks snap a two-week losing streak. For the week, the Sensex gained 1.73 per cent and the Nifty added 1.1 per cent. The market capitalisation of BSE-listed companies increased by ₹9.6 trillion to ₹462 trillion.

Investor sentiment improved after reports suggested Washington and Tehran could sign an interim peace agreement over the weekend. The proposed deal is expected to include the reopening of the Strait of Hormuz, a critical shipping route through which nearly a fifth of the world’s oil supply passes.

The US-Iran conflict had led to the closure of the strait, triggering one of the most severe energy shocks in recent years. Brent crude prices fell sharply overnight and were trading at around $87.3 a barrel on Friday. Despite the decline, crude remains about 18 per cent higher than pre-war levels.

The conflict had also intensified foreign selling in Indian equities and weighed on the rupee, which has depreciated 4.35 per cent since the outbreak of hostilities. During the same period, the Sensex and Nifty have declined 7.1 per cent and 6.2 per cent, respectively.

“I don’t expect foreign investors to return in a meaningful way until there is a formally signed agreement and clarity after the proposed 60-day negotiations on nuclear issues. Until then, the best outcome would be a moderation in selling pressure,” said U R Bhat, co-founder of Alphaniti Fintech.

“The market was looking for relief from uncertainty and received it during trading hours. However, investors will closely examine the details over the weekend. On Monday, we will know whether the rally sustains or whether scepticism returns and erodes some of the gains,” he added.

Market breadth remained robust, with 3,155 stocks advancing against 1,119 declines on the BSE. HDFC Bank, which gained 3.7 per cent, contributed the most to the Sensex’s rise, followed by Larsen & Toubro, which climbed 4.9 per cent.

“Immediate resistance for the Nifty is placed in the 23,770-23,800 zone. A sustained move above this range could extend the pullback towards 23,950 and subsequently 24,100. On the downside, immediate support is placed at 23,470-23,450,” said Sudeep Shah, head of technical and derivatives research at SBI Securities.

Foreign portfolio investors remained net sellers, offloading shares worth Rs 1,082 crore on Friday. Domestic institutional investors, meanwhile, were net buyers to the tune of Rs 5,341 crore.