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War in Gulf triggers broad based selling, history suggest better days ahead post this conflict

ICICIdirect Research 13 Mar 2026 DISCLAIMER

Indian markets have shed away ~8% points since the war started with global equity sell off and more importantly leading to a surge in crude oil prices in excess of 15% uptick. Given Iran controls over Strait of Hormuz (20% of worlds oil travels through this) and this has economic implications on energy importing countries like India.
The key questions that will keep things volatile from an economic and global asset perspective is how long the conflict will continue and how high and longer the crude prices will remain elevated. Historically, geopolitical tensions have led to decline of 3-12%, however next 6 months have had median returns of 38% thereafter.
Interestingly, one point to note is that since the start of the conflict, large caps have fallen more (down 8%) than the mid-caps (down 7%) and small-caps (down 6%); hence the recovery could mimic the same wherein large caps could lead the recovery followed by mid-caps and small-caps.
Near term pressure would remain on sectors such as OMC, Aviation, Paints, Fertilisers. However, these sectors would rebound also sharply once dust settles. Domestic oriented companies, Pharma remain largely insulated in this case, while with increased focus on Defence space will drive the stock prices in the sector.

Markets after the current conflict
So, we believe geopolitical events like the current one provide stupendous buying opportunities from a 2–3-year perspective. One can deploy, basis risk appetite, on a lumpsum basis or a staggered basis (to counter any incremental volatility in the upcoming days).
From earnings and valuation perspective, we believe India can deliver 10-15% PAT CAGR over FY25-FY28E (lower band takes into account elevated crude prices for a period of time, which at this point is difficult to fathom) whereas the broader markets are trading at 17.5x FY28E EPS.
From a positioning perspective, we believe given the uncertainty, one should prefer domestic oriented sectors like Banks, Infra/cap goods/cement, Auto (OEM & Ancs with least export share), Real Estate, Consumption (Discretionary). Near term pressure would remain on sectors such as OMC, Aviation, Paints, Fertilisers etc. However, theses sectors would rebound also sharply once dust settles
What to expect: The lack of follow through strength resulted into prolongation of corrective bias. In current scenario, with past two weeks correction, Nifty has already corrected 8% and 11-12% correction would mature around 22200. Meanwhile, for a meaningful pullback to materialize, index need to decisively close above 24400 marks.

Key Monitorable:
De-escalation of geopolitical tension
Cool off in Crude oil prices
US FOMC Meet

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