More Stories

Informist, Wednesday, May 6, 2026

 

By Arya S. Biju

 

MUMBAI – With shipping volumes through the Strait of Hormuz still a fraction of what they were before the West Asia war and the US-Iran negotiations yet to lead to a meaningful breakthrough, the direction of the Indian equity market in the near term will continue to be driven by movement in crude prices and developments in the war, market participants said. After seeing some rebound in the previous month, the Indian equity market is expected to be range-bound or fall in May as sentiment is fragile due to concerns about higher energy and related costs from war-led disruptions, depreciation of the rupee against the dollar, and continued outflow of foreign funds. 

 

Some analysts said that negative impacts due to the West Asia war known so far have already been priced in by the domestic market, but risks of further escalation of attacks in the region, failure of the US to escort ships through the Strait of Hormuz, and absence of a credible ceasefire between the US and Iran opened the path to more correction in the market. Though corporate earnings for the March quarter began on a strong note with slightly better than expected earnings so far, management commentaries have become more cautious and risks of earnings downgrades hold up amid fears of high crude prices for a longer period. 

 

The median of estimates from 14 brokerages polled by Informist suggests the Nifty 50 is likely to find support at 23500 points. This indicates that the index could fall up to 2.5% in May. This is almost 7% lower than its pre-Iran war levels and around 11?low the all-time high of 26373.2 points hit in early January.  

 

More than two months into the conflict between the US, Israel, and Iran, the benchmark index has shed over 4%. Even though it saw some recovery in April after a sharp fall in March, the index is expected to be range-bound in the near term with volatility likely. In the worst-case scenario, analysts expect crude prices to rise to $140–$150 per barrel, which could lead to a 7-10?ll in the Nifty 50 index from current levels to 22403.7-21681 points.

  

While occasional bouts of gains are expected, a sustained sharp rise in the market would require some kind of resolution on the war front and some softness in crude, Sanjeev Hota, director and head of equities strategy at Standard Chartered Securities India, said. The median of resistance levels suggests the Nifty 50 index could rise to 2.1% from current levels, before facing resistance at 24600 points. Resistance levels of technical analysts suggest the index could rise anywhere between 1% and 5%. 

 

RISKS TO GROWTH, EARNINGS

High crude oil prices for a prolonged period could hit economic growth, create fiscal and monetary challenges, and affect several energy-intensive and import-dependent sectors, analysts said. Brent Crude oil prices have risen around 50% since the US-Iran war began, with the June futures contract at around $108 per barrel at 1135 IST Wednesday, up from around $70 per barrel before the war. 

 

If crude stays around $90 per barrel for the entire 2026–27 (Apr-Mar), inflation in India could go up by around 70 basis points to 4.7% or 4.8%, Hota said. In such a case, he expects growth in the country's GDP to moderate to 6.3% from 7.6% in FY26. "But if there is a further 10% to $10 (per barrel) rise in crude, there may be further change in the estimate," he added.

 

If crude averages closer to $105–$110 per barrel, inflation could move above the Reserve Bank of India's guidance of 4.6% and potentially reach the 5% zone, Anirudh Garg, partner and fund manager at INVasset PMS, said. "The pressure may not come immediately through retail fuel prices if pass-through is delayed, but it will still show up through transport, chemicals, packaging, aviation, logistics and broader input costs," Garg said. 

In April, the United Nations trimmed its FY27 GDP growth projection for the Indian economy to 6.4% from 6.6% estimated in January. This was lower than the Reserve Bank of India estimate of a 6.9% growth. The International Monetary Fund, on the other hand, raised its forecast for India's GDP growth in the current financial year by 10 basis points to 6.5%, citing continued momentum from FY26 and lower US tariffs. However, IMF's growth projection is also below the RBI's estimate.  

 

Possibility of higher inflation raises the case for a hike in interest rates by the RBI, but Garg said a hike is not the base case yet because demand is not overheating and food inflation remains manageable. "But rate cuts are clearly off the table. If crude stays above $110 (per barrel) and the rupee remains under pressure, the RBI may maintain a prolonged pause, use liquidity tools, and sound more hawkish in upcoming meetings," he added. Similarly, V.K. Vijayakumar, chief investment strategist at Geojit Financial Services, expects the apex bank to consider a rate hike only once crude remains above $120 per barrel and inflation has the potential to shoot up, but not immediately.  

 

Most analysts and market participants polled expect further earnings downgrades in FY27 due to high crude prices, though the impact is likely to be uneven. Sectors directly linked to crude and crude oil derivatives, such as aviation, logistics, paints, chemicals, tyres, cement, oil marketing companies and other import-dependent sectors will see the hardest hit, they said. "The market will reward companies with pricing power, domestic-demand exposure and low import intensity, while punishing businesses where cost pass-through is delayed or regulated," Garg said.  

 

Several global brokerages, including HSBC, Nomura, and Goldman Sachs, have downgraded Indian equities recently, citing growing risks to corporate earnings from high energy prices due to the ongoing conflict in West Asia. "The expectation before the war was that the earnings growth in FY27 would be around 16–18%. Now, that is gone. We will be lucky if we can achieve a target of between 12–15%," Vijayakumar said. 

 

VALUATIONS

Some market participants believe valuations across the board have come down after the recent correction, while several others said prices are still not justifiable, particularly in the mid and small-cap space, given the muted growth outlook and better risk-reward in cheaper emerging markets. "Valuations have become more reasonable, but not outright cheap. However, valuation comfort depends on whether FY27 earnings estimates hold. If earnings are downgraded by 5–8%, the apparent valuation correction becomes less meaningful," Garg said.   

 

Analysts said large-cap stocks are now relatively better placed because of stronger balance sheets and better liquidity. Global investors generally return to these stocks first when risk appetite improves, they said, adding fund flows to mid-caps and small-caps will remain more stock-specific.

 

FOREIGN INVESTORS VS INDIAN EQUITIES

Foreign portfolio investors have been on a bout of massive selling in India since the West Asia war broke out. They have net sold domestic equities worth INR 1.84 trillion since the beginning of the war. 

 

Analysts expect foreign portfolio investors to continue selling Indian equities if crude prices stay high, the rupee remains weak, and unless signs of better earnings growth emerge. "All the money that is flowing from India, the FDI outflows, that is going mainly into AI (artificial intelligence) stocks (in US, Taiwan, and South Korea)," Vijayakumar said. Until the euphoria on the AI front sees some tapering, outflows are likely to continue, given the country's limited exposure to AI trade, according to analysts.

 

While a diplomatic breakthrough in the West Asia war would be the biggest immediate trigger for these investors to return to Indian equities, a sustained full-blown positive flow will need better visibility of earnings growth, not just lower crude prices. Until then, continued buying by domestic investors supported by the unwavering systematic investment plan run rate would cushion the fall in the market, they said.    

 

Following are the support and resistance levels for the Nifty 50 index for May from 14 brokerages:

 

 

Brokerage	Support 1	Support 2	Resistance 1	Resistance 2
Anand Rathi Shares and Stock Brokers	23800	23500	24300	24600
Angel One	23500	23000	24600	25150
Ashika Group	23956	23300	24500	25000
Chola Securities	23800	23150	24600	25200
Emkay Global Financial Services	23400	--	24800	--
Globe Capital Market	23500	23300	24750	24800
HDFC Securities	23700	--	24350	24600
ICICI Securities	23400	--	24400	--
Kotak Securities	23000	--	25000	--
Lakshmishree Investment and Securities	23800	23598	24244	24397
LKP Securities	23300	--	24400	--
Motilal Oswal Financial Services	23500	--	24900	--
Nirmal Bang Institutional Equities	23900	--	24500	--
Teji Mandi Investment Technologies	23200	--	25000	--
Median	23500		24600

 

End

 

US$1 = INR 94.61

 

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000 

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.