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Informist, Monday, Apr. 6, 2026

 

By Anshul Choudhary

 

MUMBAI – High crude oil prices are seen pushing up costs for several sectors and affecting the earnings growth of companies, but analysts are convinced the Indian equity market has priced in near-term risks from the US-Iran war as the Nifty 50 has fallen nearly 9% since the war began and nearly 13% from its lifetime high.

 

Several analysts polled by Informist said the market seems closer to a bottom and a recovery is possible this month after the big fall seen in March. The Nifty 50 index fell more than 11% in March--its worst fall in a month since March 2020, when a countrywide lockdown was announced due to the COVID-19 pandemic. The median of estimates from 19 brokerages suggests the Nifty 50 is likely to find support at 21750 points, which is around the index's 52-week low. The median of support levels suggests the index can fall up to 5% in April.

 

Over the past three sessions, the Nifty 50 has made a sharp recovery, rising nearly 3% in this period, which has given some analysts the confidence that stocks are likely to find support at lower levels in the near term. The Nifty 50 Monday ended over 1% higher at 22968.25 points.

 

The market will rise further if there is an end in sight to the US-Iran war, but the after-effects of the war will continue to affect the country's economy and earnings of companies. Goldman Sachs last month reduced its forecast for India's GDP growth for 2026 to 5.9% from 6.5?rlier--which was even higher at 7?fore the war broke out. The brokerage said the growth projections may be cut further if the Strait of Hormuz does not open for trade by mid-April.

 

Uncertainty over an end to the West Asia conflict has led to a sharp divergence in expectations about the Nifty 50 level this month. Resistance levels of technical analysts suggest the Nifty 50 can rise anywhere between 0.1% and 9.0%. The median of resistance levels suggests the index could rise up to 4% from the current level before facing resistance at 23850 points.

 

The sharp fall in March has eased concerns of high stock valuations. Motilal Oswal Financial Services said the 12-month forward price-to-earnings multiple for the Nifty 50 has come down to 17.7, which is 15?low the 10-year average of 20.9.

 

Though stock valuations have come down, analysts are still advising against investing heavily given the risk to economic growth from high crude oil prices. Brokerage Nomura said the MSCI India index valuation is at a level from which investors have seen strong gains in the past but also warned that "starting valuations are on the higher side than anytime in the past (except January 2025)...(and) a protracted conflict leading to significant global growth/inflation concerns can cause forward returns to remain subdued for longer".

 

RISKS TO GROWTH

Brent crude oil prices have risen 50% since the US-Iran war began, with the June futures contract hovering around $108 per barrel, up from around $70 per barrel before the war. The closure of the Strait of Hormuz has left businesses struggling to get natural gas to run production at full capacity and several businesses have turned to costlier alternatives.

 

Analysts warned that small businesses may have to shut production completely if the shortage of gas persists. ICICI Securities argued that small-cap and mid-cap companies are at extremely high risk as a large part of this universe is directly dependent on oil and gas for energy and may not have a strong enough market presence to pass on the additional cost to consumers.

 

Several companies in the consumer durables and automobile sector, which were expected to benefit from the lower goods and services tax, have either raised prices or are likely to do so to offset the hit from higher input costs. Analysts said higher costs and a possible hit to demand after price hikes may affect earnings growth for the March and June quarters. However, they refrained from quantifying the extent of the hit to earnings, citing the war.

 

"Earlier, market was expecting banking earnings to remain very strong, but now with the forex thing (the cap announced by the RBI on net open positions in the rupee in the onshore deliverable foreign exchange market), nobody knows what is the exposure (of banks)... how much of loss will be taken in the fourth quarter, or if it will be taken in the first quarter," said Asutosh Kumar Mishra, head of research at Ashika Stock Broking. "(In the case of) capital goods industry and automobiles, the raw material cost has gone up... and in many places, raw material itself is not available," he added.

 

Analysts are concerned that crude oil prices may not come down to the levels seen before the war even if the US and Iran reach an agreement soon. Owing to high crude oil and gas prices, Goldman Sachs last month sharply cut earnings growth projections for the Nifty 50 companies for 2026 to 8% from 16?rlier.

 

Several brokerages are yet to adjust their estimates as they await clarity on the US-Iran war. "We expect consensus estimates to be cut meaningfully over the next 2-3 quarters, in line with trends in prior oil-supply shocks, with the largest cuts in domestic cyclical pockets," Goldman Sachs said in a report. Market participants will look closely at the March-quarter earnings, which will start from this week.

 

In the December quarter, the year-on-year revenue growth of Nifty 50 companies improved to 9% as the cuts in GST aided consumption, but the gains were small and limited to a few sectors. The combined net profit of the 50 companies, excluding one-time items and the labour code implementation cost, rose just over 9% on year.

 

Analysts had hoped the lower GST would help improve earnings growth further in the coming quarters, with some brokerages projecting the growth of Nifty 50 companies in the financial year 2026-27 (Apr-Mar) at 16-17%. However, most analysts said the high crude oil prices will offset the positive effect of lower GST and result in a cut in earnings estimates.

 

There is another risk to earnings growth from the El Nino weather phenomenon, which could affect rainfall during the monsoon season and hit demand from rural areas. Market participants expect to get an idea about the extent of impact on crops from El Nino only after June.

 

RATE HIKES, FLOWS

Analysts warned that high crude oil prices over a prolonged period could push inflation well above the Reserve Bank of India's target of 4%. "There is a reasonable probability that headline inflation in India could climb above 6-7% in the coming months," Dhananjay Sinha, head of research, strategy and economics, at Systematix Shares and Stocks, said in a report.

 

Some economists said the RBI might consider raising interest rates if the war lasts for the better part of the year. Others are convinced about a hike even in the current situation. Goldman Sachs expects the RBI to raise interest rates by 50 basis points if the war continues till mid-April. High interest rates could hurt the growth of Indian companies, which are already struggling with weak demand and are yet to show a sustained performance in quarterly results.

 

India's dependence on crude oil supplies from West Asia and the risk of a surge in imports has pushed foreign investors to sell Indian equities and the currency. The rupee has depreciated more than 2% against the dollar since the war began and more than 9% in the past 52 weeks. With Brent Crude futures still above $100 per barrel, analysts are concerned the rupee, which crossed 95 a dollar for the first time last week, will keep falling to fresh record lows.

 

The sharp depreciation of the rupee has been a major issue for foreign investors as it eats into their returns. In March, foreign investors net sold equities worth INR 1.18 trillion--the highest-ever in a month. Given the country's dependence on oil imports, Nomura recently downgraded Indian equities to "neutral" from "overweight" and advised investors to shift to markets in South Korea and China.

 

Following are the support and resistance levels for the Nifty 50 index for April from 19 brokerages:

 

Brokerage	Support 1	Support 2	Resistance 1	Resistance 2
Anand Rathi Shares and Stock Brokers	22400	21500	23500	25000
Angel One	22000	21700	23350	23500
Ashika Group	22500	22000	23000	-
Axis Securities	22000	-	23000	23400
Chola Securities	22000	21900	24000	24500
Globe Capital Market	21750	21200	23800	24300
HDFC Securities	21500	-	23200	-
ICICI Securities	22500	22300	23800	24000
IDBI Capital Markets & Securities	22200	21700	23500	24500
Kotak Securities	22200	21750	23200	23800
Lakshmishree Investment and Securities	22000	21750	23000	-
LKP Securities	22200	21400	23300	24300
Motilal Oswal Financial Services	22000	-	23800	-
NVS Brokerage	22400	-	23500	23700
Religare Broking	21000	-	24000	-
SAMCO Securities	21600	21200	23500	24200
Sharekhan	21750	21250	23500	23850
StoxBox	22000	21800	23000	23300
Teji Mandi Investment Technologies	21800	-	24200	-
Median	21750		23850

 

End

 

US$1 = INR 93.06

 

With inputs from Team Informist

Edited by Rajeev Pai

 

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