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Declining Crude oil & other commodity prices to pre-war levels lowers major macro-overhangs

ICICIdirect Research 26 Jun 2026 DISCLAIMER

Equities extended gains over the third week tracking easing of geopolitical tension and correspondingly retreat in crude oil prices to pre-war levels. Nifty settled the truncated week at 24056, up 0.2%.

Midcap’s relatively underperformed (down 1%). Sectorally, Realty, Auto, Pharma, Financials remained in limelight while Metal, energy underperformed.

What we expect:

  • Nifty has been facing stiff resistance around its 100 days EMA (placed at 24100) over past four months. Therefore, a decisive close above past two week’s high ~24200 along with 100 days EMA would open the door for next leg of up move towards 24800 in the month of July
  • Failure to sustain above 24200 would result in prolongation of consolidation in 24200-23600 zone

Our constructive bias is based on the following observations:

a)      Easing of geopolitical tension: Re-opening of Strait of Hormuz has triggered a sharp correction in Brent crude oil prices which is trading at three months low ($73) and at pre-war levels. Besides the softening of base metal prices including precious metals is expected to moderate inflation pressure. Thereby key beneficiaries like Auto, OMC, Paint, Aviation, Realty would be in focus going ahead.

b)     Bank Nifty: After 3 months of corrective phase, index closed above previous month’s high, confirming bullish reversal. Further, five years consolidation breakout on ratio chart of Bank Nifty vs Nifty signifies outperformance going ahead. Expect Bank Nifty to head towards 60000 in the near term 

c)      Mid/Small-Caps: Cup & Handle breakout on monthly chart of Midcap index augurs well for acceleration of upward momentum towards 70,000 (14% upside). While 18 months falling trend line breakout in small cap index bodes well for catch up activity towards 22600 (20% upside)

Key Monitorable:

a)      Auto Sales Numbers

b)     FII Inflows: The extended profit booking in these AI led indices may help to shift the FII’s interest from AI trade to growth oriented emerging markets like India. Expect selling intensity to soften and domestic flows to become better

c)      US 10 Year Bond Yield: Sustenance below 4.3% would provide highly supportive macro backdrop for emerging markets

 

Crude declines to ~USD 73/barrel amidst easing geopolitical uncertainties; Reaches lowest level since start of US-Iran War; Paint and FMCG companies to witness easing in cost pressure

  • Brent Crude prices have declined to ~USD 73/barrel, to almost its lowest since start of the US Iran war on February 28th 2026. It has declined by ~37% from its May 2026 peak levels of USD 115/barrel.  At the start of the war, Brent Crude prices were trending at ~USD 70/barrel.

d)     Crude is an important variable for input material for Auto, OMCs, Paint, FMCG, Aviation, Realty, cement among others and these sectors would be in focus going ahead.

  • Paint companies and FMCG companies - crude oil constitutes 20-25% of Paint companies input cost whereas for FMCG companies it forms ~10-15% of the input cost. Given the decline in crude prices and anticipated to stabilize at current levels, margin pressure will start to ease more for paint companies and FMCG companies largely in H2FY27.
  • Key Beneficiaries (coverage stocks): Paint/Construction chemical Companies – Asian Paints/Pidilite, FMCG Companies – Tata Consumer Products, Marico, Nestle India

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