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Informist, Tuesday, Mar. 10, 2026

 

By Anshul Choudhary

 

MUMBAI - Benchmark equity indices may further fall over 5% if the US-Iran hostilities continue for 3-4 weeks and if Brent crude oil futures again rise above $100 per barrel, market participants said. Crude oil futures rising above the $100 mark is a major issue for India, which can lead to a spike in inflation, and hit demand and profits across sectors, analysts said.

 

The Nifty 50 index can fall to 20000 points if crude oil is over $100 per barrel for a month, the head of research at a large domestic brokerage house, said, requesting anonymity. This would translate to a fall of 17% from Monday and a 24?cline from its lifetime high. Currently, the Nifty 50 index is down nearly 9% from its lifetime high of 26373.2 points, which it had touched in January.

 

Equity markets slumped on Monday as the military conflict between the US and Iran spread to other countries in West Asia, leading to several of them announcing crude oil production cuts. This pushed Brent crude May futures to near $120 per barrel intraday--a single-day rise of nearly 30%. Later, it came off highs to around $90 per barrel after the US President Donald Trump said the Iran war would end soon. Crude oil prices are still up more than 23% compared with prices before the US and Israel first attacked Iran on Feb. 28. Brent crude had last seen such a steep rise in prices during the Russia-Ukraine war in 2022.

 

The Nifty 50 slumped more than 3% intraday on Monday as crude oil surged. Later, it came off lows to end 1.7% lower at 24028.05 points. Analysts, looking at fundamentals, said the index could further fall more than 5% to around 22800.

 

Crude oil prices again crossing $100 per barrel will be detrimental for India, which imports most of its oil requirements and it can have a cascading effect on demand across sectors. Private companies would refrain from any investments due to the uncertainty around the situation in West Asia, analysts said.

 

"The way Iran is playing, it is a strategic game. Even if they are losing in military terms, but they are involving everyone in the Middle East (West Asia) region," Pravin Bokade, head of equity research at IDBI Capital Markets & Securities, said. "It is a long war, economically it seems to be very, very painful at this point in time."

 

Bokade warned that the market still hasn't factored in the risk to commodity prices, especially a shortage in fertilisers which come from West Asia. "It is not that only (oil) production has gone down, tanker freight rate also has increased, insurance prices are also rising." he said.

 

Analysts said the market reaction Monday was largely due to negative sentiment as crude oil prices jumped. This reaction might worsen in the coming days and indices are expected to keep falling if the situation in West Asia doesn't improve soon.

 

"If $100 remains for let's say 15-20 days...and government is saying we have 45 days inventory. So now after 15-20 days, your higher cost of procurement will also get into the system," Awanish Chandra, executive director at SMIFS Ltd., said. "I have to replenish for 15 days at a higher price. So my overall pricing will go up for the whole inventory...nobody will have any choice (but to raise prices)."

 

There is a possibility inflation could rise above the 4% target of the Reserve Bank of India. In February, the RBI had projected CPI inflation at 4-4.2% for the June and September quarters. "(A) spike in crude oil would also be inflationary, as the weight of petrol, diesel and LPG is higher in the new CPI series at 6.8% (3.6% in earlier series)," ICICI Securities said in a note.

 

Analysts largely agree the Nifty 50 will return to levels around 25200 levels if the US, Israel, and Iran reach a ceasefire. However, analysts cautioned the index will find it difficult to move higher than 25200 level immediately as there is no underlying strength in the economy.

 

"If the war stops, then probably we might get some rally...(but) that is a bull trap," Bokade said. Several analysts said the income levels in India need to rise across the country for demand to improve in the economy and for indices to reach earlier lifetime highs.

 

DOUBTS OVER GST BENEFIT

The inflation risk from the high crude oil prices is likely to erase the positive effect of the cut in the goods and services tax, which had begun to help earnings growth in the December quarter. Automobile and consumer durable products were among the biggest beneficiaries of the cuts in GST. However, these industries are facing their own issues.

 

Analysts are concerned automobile makers may be forced to cut production because there is a shortage of gas as supply from West Asia has taken a hit. This could hurt growth just as the industry had started seeing better demand after the GST rate cuts.

 

Air-conditioner makers were expected to benefit after GST on products was cut to 18% from 28%. However, these companies have increased prices by 5-18% recently due to higher input costs, a weakening rupee, rising freight expenses, and also to comply with the new energy efficiency norms. "These price hikes largely offset the benefit of the GST rate cut announced for ACs earlier," ICICI Direct Research said.

 

This can be an issue for the market as brokerages' earnings projections had incorporated better demand due to the cut in the GST. The rise in oil prices could lead to cuts in earnings estimates as analysts expect prolonged period of higher oil prices to hit margins of companies.  End

 

US$1 = INR 92.13

 

Edited by Vandana Hingorani

 

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