Indian stock market extended gains for the second consecutive session, with Sensex and Nifty opening in the green with mild gains as cooling bond yields, a slight drop in oil prices, and persistent FII buying boosted investor sentiment.After opening, Sensex gained 400 points to 75,725 while Nifty 50 gained 115 points to 23,765 during Tuesday's trading. This came as India VIX, which measures volatility in markets, declined more than 4% to 18.84.IT stocks, including Infosys, HCLTech, Tech Mahindra, and TCS, were the top gainers on Sensex, rising to 4%. ITC, L&T, Bajaj Finance, and others followed. On the other hand, Titan, Eternal, and Kotak Mahindra Bank emerged as the top losers, falling up to 0.7%.The optimism was broad-based, with Nifty Midcap 100 and Nifty Smallcap 100 indices gaining 0.5% each. Sectorally, Nifty IT continued to lead with a 3% jump in the early trading hours. Nifty Metal, however, slipped into the red. Around 1,791 stocks advanced on NSE and 655 declined, while 90 remained unchanged.US-Iran conflictUS President Donald Trump on Monday said that he has paused a planned attack against Iran to allow negotiations, after Tehran sent a peace proposal to Washington. He added that there was now a "very good chance" of ‌reaching a deal limiting Iran's nuclear program.After Iran sent the US a new peace proposal, Trump said he has instructed the military that "we will NOT be doing the scheduled attack of Iran tomorrow, but have further instructed them to be prepared to go forward with a full, large-scale assault of Iran, on a moment’s notice, if an acceptable Deal is not reached."In ⁠his post, he said the leaders of Qatar, Saudi Arabia and the United Arab Emirates had requested that he hold off on the attack because "a Deal will be made, which will be very acceptable to the United States of America, as well as all Countries in the Middle East, and beyond."As a result of the latest developments, oil prices cooled down. Brent crude dropped more than 2% to fall below $110 per barrel., WTI Crude meanwhile also declined around 2% to $103 per barrel.Bond yields cool downAfter soaring to record high levels yesterday, bond yields cooled down. The yield on benchmark US 10-year notes fell to 4.601% in the morning. The 30-year bond yield surged to 5.139%. This came after a global debt selloff, which led to falling bond prices and rising yields.FIIs continue buying Indian equities for 3rd day straightForeign investors remained net buyers of Indian equities for the third consecutive session, purchasing Indian shares worth Rs 2,814 crore on Monday, according to provisional data on NSE. However, this is negligible when compared to the massive selloff seen earlier. FII remained net sellers of Indian equities in 8 out of 11 sessions in May so far."FIIs turning buyers, though not a trend yet, is an indication that valuations are becoming attractive in India. Also, the concerns of bubble valuations in AI stocks are increasing. If the FII buying becomes a trend, largecaps in financials, particularly in leading banks will be the segment to move up since their valuations are attractive and the segment has growth potential,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.Rupee slides againDespite the renewed optimism, some caution is warranted as rupee continues to decline. The Indian currency fell 18 paise to 96.38 against the US dollar in early trade. India’s high dependence on imported crude is worsening sentiment, with Brent crude staying elevated amid ongoing uncertainty around the US–Iran conflict and Strait of Hormuz concerns, said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.The analyst highlighted that the broader trend for the rupee remains weak, with markets closely watching India’s strategic efforts to secure lower-cost oil and gas supplies to ease pressure on the import bill and forex reserves. “Technically, rupee support is now seen near 96.55, while immediate resistance is placed around 96.00–96.10,” he added.What lies ahead?Broadly, at the macro level, the concerns surrounding growth, inflation and currency depreciation persist, Vijayakumar cautioned. “Therefore, investors should focus on sectors which will be least impacted by these potential headwinds. Pharmaceuticals, power-related stocks and defence stocks will be least affected by a potential slowdown,” he said.“Q4 results have been good, in many cases better than expected. This is an indication that the economy had started to recover in response to the fiscal and monetary stimulus measures of last year, before getting impacted by the energy crisis. Therefore, if there is a quick resolution of the Hormuz crisis, the economy may recover fast and the slowdown expected this year will not be as severe as feared,” he added.(With inputs from agencies)(Disclaimer: Recommendations, suggestions, views and opinions given by experts are their own. These do not represent the views of The Economic Times)