Kolkata: With the US and Israel locked in a bitter fight with Iran and both sides vowing to carry it on till a decisive end is reached, panic has spread in the Indian stock markets with large scale selling pressure pulling down the benchmark indices by well over 1% on Monday. The market holiday on March 3 due to Holi has come as a welcome breather from the mayhem but it could be only temporary.
“The uncertainty related to the war in West Asia will loom large over the market in the near term… The major risk from the market perspective is the energy risk arising from the surge in crude. Indications are that a sharp spike in crude by, say 20%, is likely only if the Hormuz Strait is closed, obstructing oil transport through the strait. There is no official confirmation of this yet. If Brent crude remains around $76, equity markets may remain weak but are unlikely to witness a big crash,” V K Vijayakumar, chief investment strategist at Geojit Investments was quoted in the media as saying.
Not a drop of oil through the Strait of Hormuz
The faint optimism in the comment of the Geojit Investments expert might not be borne out by the on-the-ground situation. Iran has not only refused to be cowed down by its far-superior opponents, but also has said that it will not allow a drop of oil to pass through the Strait of Hormuz through which about one-fourth of the global sea-borne crude oil passes. Analysts are apprehensive that if the situation remains like this for some days, the price of crude can easily shot past the $100 barrel. Citi analysts have estimated the base-case range at $80-$90 per barrel for at least the next week.
Hold your nerves, that’s the advice
All experts advised investors not to give in to panic but hold their nerves. “Experience tells us that panic selling during a crisis is the wrong strategy. Data from crises during the last many decades tells us that an event like the present crisis will not have any impact on the market six months later. This is the takeaway from market behaviour after recent crises like Covid, Russia-Ukraine and the Gaza conflict,” Vijayakumar was quoted in the media.
Buy on dips
Vijayakumar also highlighted that one could also think of buying quality stocks on dips. These can be especially be done in sectors such as banking, automobiles, capital goods and defence. Investors are more bothered about the fallout of the conflict not ending quickly.
Market analysts are hopeful that the conflict will end in one or two weeks. In case it happens, the Indian markets can rebound quickly. Seshadri Sen of Emkay Global has told the media, “We expect the hostilities to end in 1 to 2 weeks and the markets to recover sharply, as they did in Oct 23 and Jun 25… A sustained war, however, poses significant macro risks for India.”
Winners and losers from the conflict
ONGC and Oil India are the beneficiaries as crude prices go up as they sell according to the landed price of crude. According to JM Financial, for rise of $1 per barrel in Brent crude prices, the EPS of ONGC and Oil India goes up by 1.5-2% each.
BEL, HAL and Data Patterns are beneficiaries too. MNC brokerage Jefferies highlights that India’s defence expenditure jumped 18% y-o-y in FY26 and more double-digit growth is proposed.
All oil marketing companies are the big losers. JM Financial projects for every $1 per barrel rise in Brent crude price the auto-fuel gross marketing margins of these oil marketing companies goes down by Rs 0.55 per litre. Airlines face an unkind blow of higher fuel costs and flight cancellations.
Sen from Emkay highlights that L&T, KEC and IndiGo can be the most vulnerable if hostilities continue. L&T has a lot of exposure in West Asia and projects in this regions contributes 37% of its whopping Rs 7.33 lakh crore order book.
JM Financial thinks KEC, L&T, Indigo, KPTL, Cummins India, Thermax and AIA Engineering could be sufferers, thanks to their export exposure.
Crude price fallout
Looming large in the horizon and in the back of the minds of the analysts is a frightening correlation between the price of crude oil and the GDP growth of India — an energy-hungry economy that imports almost 90% of its crude oil requirements. For every $10 rise in the per barrel cost quickly raises India’s current account deficit elevates the demand of dollars and pulls down the price of the Indian rupee. It also triggers a rise in domestic inflation. One of the tactics that the Centre might think of is trying to boost the purchase of Russian crude which is available at deep discounts. The SU Supreme Court’s trashing of Donald Trump’s tariffs has paved the way for Delhi to raise import of Russian crude.
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