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Informist, Wednesday, Apr. 8, 2026

 

By Simran Rede

 

MUMBAI – The Indian equity market may well regain its pre-war levels in the near term after the US and Iran agreed to a two-week ceasefire. However, this recovery could be fragile as any negative development in West Asia could result in a reversal. The equity market appears to have taken heart from the lack of any negative surprise in the Reserve Bank of India's monetary policy statement and commentary even as some fund managers and market experts acknowledged the central bank is likely to raise interest rates sooner or later if the war resumes.

 

Wednesday, the RBI's rate-setting panel decided to stand pat on the repo rate and maintain its 'neutral' stance. The central bank projected India's GDP growth for the financial year 2026-27 (Apr-Mar) at 6.9% while cutting the growth estimate for the June quarter to 6.8% from 6.9%. The RBI forecast headline inflation for FY27 at 4.6% while keeping the forecast for Apr-Jun unchanged at 4.0%. 

 

Crude oil prices, which had breached the psychological $100-per-barrel mark after Iran closed the crucial Strait of Hormuz to traffic, are likely to remain benign unless there is a negative trigger. Increased energy price pressures and weather disturbances affecting food prices are likely to pose upside risks to the inflation outlook, the RBI said.

 

The monetary policy did not have much impact on Indian equities Wednesday as the rise was purely because of the two-week ceasefire, said George Thomas, fund manager - equity at Quantum AMC. While a persistent rise in crude oil prices and geopolitical uncertainty could have a negative impact on the equity market, one will have to see how things pan out, he said. 

 

Although high inflation and geopolitical uncertainty are likely to pose risks to equities, fund managers and market participants expect a healthy improvement in corporate profits, assuming the war in West Asia ends in the near term. "...if things were to permanently resolve, India is in a natural earnings up-cycle. And that earnings up-cycle should resume. So from that perspective, there is more room for markets to move up", Thomas of Quantum AMC, said.

 

The repercussions of war are likely to be seen in earnings for the next two quarters due to the rise in crude oil prices. However, fund managers and heads of research expect the earnings for FY27 to be much better than those in FY26, given a low base and policy boost by the government. 

 

Some brokerages downgraded their earnings estimate for FY27 but market players broadly expect about 10-12?rnings growth in FY27. If crude oil prices stay above $110 per barrel for a longer period, it would have a negative impact on earnings, Manish Choudhary, head of research at StoxBox, said. 

 

Even if one were to take the bull case for earnings for the current financial year, it is still unlikely that foreign investors will return to India in a big way in the near term due to the depreciating rupee. Higher bond yields in the US and worsening global outlook are a concern for equity investors and this is evident from the sell-off by foreign institutional investors in the last two years. They have net sold Indian shares worth around INR 1.18 trillion in March and INR 447.53 billion so far in April. 

 

Investors are still expected to place cautious bets on Indian equities until there is some clarity on the ceasefire in West Asia after two weeks, Christy Mathai, equity fund manager at Quantum Mutual Fund, said. "I think right now the market is focusing on just trying to slowly move away from this whole issue and just trying to focus on the upcoming quarterly results. So, now a lot will depend on the management guidance," he said.  End

 

Edited by Deepshikha Bhardwaj

 

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