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US-Iran Conflict Impact on Nifty: Market Correction 2026
Ongoing US-Iran Conflict Keeps Markets in a Corrective Phase
The recent weakness in Indian equities closely mirrors the Russia-Ukraine crisis of February 2022. Back then, surging crude prices and aggressive FII selling led to a sharp fall in the market. In February 2022, FIIs sold nearly ₹70,000 crore in a single month, and the Nifty dropped by around 11% from a base of ~18,000.
This time, the selling has been even sharper in pace. The Nifty has already given away ~12% from 27th Feb, and March itself has seen an intense sell-off of ~₹105k crore. Even so, the index has been consolidating around the 23,000 mark in the second half of March despite high volatility. That makes the current FII Selling in the Indian Market a central theme for near-term direction.
One important detail stands out. Despite the broader weakness, there has been no incremental short build-up from FPIs, and net shorts have stayed around ~240k contracts. The rollover of these positions is likely to dictate the directional move for the April series. A change of bias is expected in the new financial year, and the relatively low short positions are likely to be rolled into April.
Nifty 50 Support Levels March 2026 to Watch Now
If you are looking for the key Nifty 50 support levels March 2026, two levels matter most in the current setup. The first is the 23,000 zone, where the index has been consolidating through the second half of March. The second is 23,800, the short-term moving average Nifty needs to reclaim for a more meaningful pullback.
Until that happens, the broader structure remains corrective. For the market to move out of this phase with conviction, price action will also need to form a higher-higher, higher-low pattern on the weekly chart in the upcoming truncated week.
Sectoral Outlook: Where Pressure Is Building and Where Support May Come From
Apart from Technology, private-sector banking heavyweights have also seen major short positions. That explains why the index has felt pressure from heavyweight segments rather than from a broad market collapse alone.
Technology, however, may offer some support. Technology stocks may see short covering ahead of quarterly results next month, which can provide some cushion to the headline index. The sharp decline in the currency may also help Technology stocks ahead of their quarterly results.
Banking could also stabilise after an important index event. The Bank Nifty rebalancing marks the final phase of a SEBI-mandated methodology change aimed at capping top constituent weights and improving diversification. With that shift now reaching its final phase, the additional burden on private sector banking heavyweights may be over, and more in-line performance could be seen from here.
Excise Duty Cut on Petrol and Diesel: Sentiment Support, but Fiscal Pressure Rises
The Government has cut excise duty on petrol and diesel by ₹10/litre. Petrol and diesel prices may not fall sharply despite the duty cut, but the move is expected to calm sentiment, as there had been growing concern that retail fuel prices might need to be increased, which would have been inflationary, both directly and indirectly, across segments.
The bigger impact is on government revenue rather than on consumers or industry. Rough estimates suggest the fiscal impact could be around ₹1.55 lakh crore annually if this revenue forgone remains for the full year. The real pressure has shifted to the debt market.
The 10-Year G-Sec yield moved up by 7 bps after the announcement to 6.94%, and the 10-year yield has already risen by 25 bps over the last two weeks, even though it had been holding relatively firm earlier despite the rise in global yields.
There is, however, a partial offset. The Government has also levied an export tax on refineries, which may reduce some of the fiscal strain.
Crude Oil Price Surge Impact on Earnings, Inflation and Valuations
The biggest domestic transmission channel from the conflict remains crude. From a corporate earnings perspective, the main risks for India are the rise in crude prices, up 50% since the start of the conflict; the depreciation of the Indian currency; and supply shocks in essential commodities such as LPG due to disruptions in key shipping routes. Even so, the present effect still appears more transitory than structural.
If the conflict persists, higher crude and its derivatives can slow earnings growth, as India imports ~85% of its crude and ~50% of its gas requirements. Corporations have already started feeling the pressure, as crude derivatives account for a meaningful share of raw material costs, and both pricing and availability remain under check.
The 2022 comparison is useful but not entirely reassuring. During the early 2022 Russia-Ukraine war, corporate earnings remained resilient, with only a 2.5% decline in EPS estimates. This time, that may not hold because the supply chain shock is larger. Corporations are still non-committal on the impact at this stage. Q4FY26 may still sail through, but the earnings impact could show up in H1FY27.
Nifty Target, Sensex Target and Valuation View
Even in a weaker earnings case, the market still has room for upside over a 12-month period. If corporate earnings were to correct by 5-6%, Nifty EPS could still come in at ~₹1,350 for FY28E versus the current estimate of ₹1,415. With a reduced PE multiple of ~20x, the base-case Nifty target still stands at 27,000, implying a healthy 17% upside potential.
At the same time, the year-end target remains unchanged because the situation is still fluid. The CY26 end Nifty target is still set at 29,500, valued at 21x FY28E PE. The corresponding Sensex target is 98,500. Markets are expected to deliver healthy double-digit returns over the next 12 months.
Valuation snapshot
The current valuation setup shows varying degrees of attractiveness across the market-cap spectrum.
|
Segment |
Valuation |
Earnings growth |
PEG / view |
|
Nifty 50 |
~16x forward P/E |
~16% earnings CAGR |
PEG: 1.0x |
|
Nifty Mid-Cap |
~19x forward P/E |
~15% earnings CAGR |
PEG: 1.3x |
|
Nifty Small Cap |
~15x P/E on 2-year forward basis |
~23% earnings CAGR |
0.7x PEG, looks most attractive |
Indian Pharma Gets a New Opening as Semaglutide Goes Off-Patent
A separate structural opportunity is opening up in healthcare. The obesity and anti-diabetic GLP-1 drug semaglutide has gone off-patent in India, triggering a first wave of generic launches by almost 10 players.
The launches cover multiple formats, including vials, pens, reusable multi-dose pens and oral formulations. Pricing starts at ~₹1,300 per month for vials from Natco and Glenmark, ~₹2,200 for reusable pens from Zydus and Lupin, and ~₹3,000 for pens from Sun Pharma. The pricing clearly points to aggressive positioning aimed at driving adoption.
This can open up obesity care as a fresh therapy category in India. Around ~18 crore people in India are either overweight or obese, which is the second-highest number globally. Most companies are currently pitching semaglutide to diabetologists, cardiologists and related specialists. Companies are also putting dedicated sales teams behind this opportunity. Lupin, for instance, has added 200 MRs for Semaglutide.
With a yearly run rate of ~₹1,500 crore, the category has the potential to grow multifold as acceptance and reach improve. It can also add an extra 1-2% to overall Indian pharma growth. After the initial rush, 7-8 large players with deep pockets are expected to dominate a market that could grow at a steady +10% rate. Among likely beneficiaries, Sun Pharma has a target price of ₹1,910, DRL of ₹1,490, and Zydus of ₹1,055.
Energy Security Moves to the Centre of India’s Power Story
Energy security is becoming a core part of India’s power sector strategy. A clear roadmap has been outlined for a resilient, future-ready power sector with a focus on renewables, storage, transmission expansion and digitalisation. India’s installed power capacity has reached ~520 GW, with ~50% coming from non-fossil sources. Renewable additions continue to dominate, including a record ~52.5 GW capacity addition in FY26, with ~75% from renewables led by solar.
Power demand is expected to grow by more than 30% by 2030, and peak demand has already touched ~242 GW. That points to strong medium-term capacity addition and equipment demand.
Bharat Electricity Summit 2026 highlights
These numbers show how large the long-term opportunity is becoming for the power and capital goods ecosystem.
- The National Resource Adequacy Plan and Transmission Plan target integration of ~900 GW non-fossil capacity by 2035-36.
- Peak demand is projected to reach ~459 GW, with an energy requirement of ~3,365 BU by 2036.
- Flexibility is being built through ~174 GW / 888 GWh of energy storage, comprising 80 GW / 321 GWh of BESS and 94 GW / 567 GWh of pumped hydro.
- The plan also includes ~22 GW nuclear capacity and ~20 GW gas-based capacity expansion.
- A transmission roadmap proposes investment of ₹7.93 lakh crore to build 1,37,500 circuit kilometres of new lines and 8,27,600 MVA of substation capacity by 2035-36.
- Power equipment manufacturers have announced a capex pipeline of ~₹32,000 crore.
- Overall power sector investment opportunity is estimated at ~₹200 lakh crore over the next two decades.
This remains positive for NTPC, Power Grid, Tata Power, Bharat Heavy Electricals Limited, Siemens, KEC International, Kalpataru Projects International and ABB India, driven by strong visibility for capex, transmission build-out and energy transition-led investments.
Indian IT and GenAI: Near-Term Pressure, Bigger Back-End Opportunity
Indian IT stocks have corrected sharply, with the Nifty IT index down ~25% YTD. The decline has been driven mainly by concerns around GenAI disruption, macro uncertainty and a valuation reset rather than a major deterioration in operating fundamentals. Deal wins remain steady, but investors are worried about what AI could do to the traditional effort-based services model.
The immediate concern: productivity-led deflation
The biggest near-term concern is productivity-led deflation.
Industry commentary suggests GenAI could lead to ~2-3% annual revenue deflation in traditional services over the next few years, as automation reduces effort and pricing. This creates a transition phase in which productivity gains become visible before new AI-led demand starts scaling meaningfully.
The medium-term opportunity is much larger
Despite the near-term pressure, the long-term opportunity remains much bigger.
GenAI is expected to expand the technology services opportunity meaningfully by accelerating automation and digital transformation. AI-led services are expected to create an incremental TAM of $300-400bn by 2030, which is larger than the current Indian IT industry size of ~$280bn.
It is also expected to create 170 mn jobs, versus the 92 mn traditional jobs it displaces. That suggests the long-term opportunity is larger than the near-term risk.
India still has a clear cost advantage
India continues to retain a strong labour arbitrage advantage.
AI-enabled software pricing and rising tech salaries are pushing enterprise tech budgets higher. Even so, the cost gap remains significant. A senior engineer in the US costs ~US$280k annually, versus ~US$52k in India, including AI tools.
This strengthens the AI plus offshore delivery model and supports tech spending growth in India.
Valuations have become more comfortable
Valuation comfort has improved across the sector.
Most IT stocks are now trading at a 17-43% discount to their 5-year average 1-year forward PE multiples. The sector may still see near-term growth moderation, but the medium-term opportunity continues to expand.
Recovery is expected to be back-ended towards FY28 and driven by the scaling of enterprise AI deployments.
Sector stance and preferred names
The sector stance remains Neutral.
The preferred names are:
- TCS
- Persistent
- LTM
Staggered investments over the next couple of months in selected IT stocks are expected to yield healthy returns over the next 18-24 months.
Company-level view
The company-specific view below retains the stated ratings, target revisions, multiples, CMPs and upside estimates.
|
Company |
Rating |
Old TP |
New TP |
Old Multiple |
New Multiple |
CMP |
Upside |
|
TCS |
BUY |
3,780 |
3,140 |
23 |
20 |
2,377 |
32% |
|
Infosys |
HOLD |
1,550 |
1,400 |
19 |
18 |
1,279 |
9% |
|
HCLTech |
HOLD |
1,650 |
1,500 |
20 |
19 |
1,381 |
9% |
|
TechM |
BUY |
2,000 |
1,650 |
23 |
20 |
1,408 |
17% |
|
LTM |
BUY |
7,400 |
5,200 |
30 |
22 |
4,293 |
21% |
|
Coforge |
BUY |
1,980 |
1,350 |
32 |
22 |
1,163 |
16% |
|
Persistent Systems |
BUY |
7,200 |
5,750 |
41 |
35 |
4,928 |
17% |
|
Mphasis |
BUY |
3,250 |
2,550 |
24 |
20 |
2,132 |
20% |
Indian Graphite Electrode Industry Finally Gets a Trigger
There is a meaningful positive development in the graphite electrode space. Graftech, a US-based industry leader in graphite electrodes, has announced a price hike of $600 to $1,200 per metric ton, depending on region, effective immediately on uncommitted volumes, which contribute ~35% of total sales volume.
Why this price hike matters
Graftech holds nearly ~15% global market share in the graphite electrode industry, with annual volumes nearing a lakh tonne.
The price increase comes after years of low prices that remained below sustainable levels, leading to an EBITDA loss for the company in Q4CY25. At the same time, raw material costs have also moved up amid ongoing geopolitical conflict.
With the last reported graphite electrode realisation at around $4,000 per tonne, the current $600-1,200 per tonne hike translates into a 15-30% price increase.
Positive read-through for domestic players
This is positive for domestic graphite electrode players, who have also been dealing with profitability pressure because of subdued global pricing.
Even so, management commentary will remain important for gauging how much of a price hike Indian players can absorb amid a potential rise in crude-derived raw materials such as needle coke.
Why HEG Ltd and Graphite India stand out
The sentiment effect is clearly positive for HEG Ltd and Graphite India.
Any price hike by these players, while they still carry existing needle coke inventory, can support near-term gains. Both companies have also announced capacity additions in the graphite electrode space, with 15,000 tonnes for HEG Ltd and 25,000 tonnes for Graphite India.
Both are also shareholders in Graftech, which further amplifies the gains.
Top pick in the space
HEG carries a BUY rating with a SoTP-based target price of ₹635 per share and remains the top pick.
This is especially relevant given the global transition toward the EAF route of steelmaking.
Paint Companies Feel the Heat as Crude Stays Elevated
Paint companies are also feeling the pressure of higher crude oil prices. Asian Paints is taking a 6-8% price increase across its portfolio to reduce the impact of the spike in Brent crude prices. The hikes are expected in two tranches, depending on crude volatility, with the first tranche expected in Apr,26.
Why are input costs rising
Brent crude has remained volatile in the $90 to $110 per barrel range.
Crude and crude derivatives account for 25-30% of paint input costs. Industry estimates suggest that if crude rises by 40%, the effective increase in raw material cost would be 12%. Current volatility in crude oil prices indicates a 12-13% increase in raw material costs for paint companies.
How much of the increase can be passed on
The expected pass-through to customers is 50-60% of the input price increase.
Asian Paints has already taken a 6-8% price hike, while Berger Paints will take a 3% hike in Apr,26. Berger Paints management has also indicated a further 3-5% price increase in subsequent months.
Margin pressure may continue in the near term
Because these price hikes will come with a lag and will still be lower than the increase in crude prices, EBITDA margins are expected to decline in H1FY27.
If crude corrects and stabilises below $75-80 per barrel, sequential recovery in EBITDA margins may be seen in H2FY27.
What this signals for the industry
This is also becoming a signal on industry structure.
Price hikes by top players suggest a fading competitive landscape in the domestic paints industry. Asian Paints stock has corrected by 29% from its high and is now trading at 44x and 38x its FY27E and FY28E EPS, respectively, reflecting near-term uncertainty.
Stock view
The stock has a Buy rating with a price target of ₹3,055.
Stocks Preferred
The preferred stock basket currently remains focused on large, liquid names with defined target prices.
|
Stock |
Target Price (₹) |
|
L&T |
5030 |
|
Maruti |
17650 |
|
M&M |
4500 |
|
Bharti Airtel |
2450 |
|
Ultratech |
15000 |
|
Solar Ind |
16700 |
Final Take
The core message is straightforward. The market is still in a corrective phase, and the combination of Middle East geopolitical tensions, elevated crude, pressure from foreign flows, and earnings uncertainty is keeping risk appetite in check.
Near term, the focus stays on whether Nifty can reclaim 23,800, whether FPI rollovers change the tone in April, and how long crude remains elevated.
Beyond that, the setup still shows selective opportunities across small caps, pharma, power, IT, graphite electrodes, and selected large-cap names, even as the broader Indian Stock Market Correction 2026 continues to shape market mood.
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