Citi has cut the target to 27,000 from 28,500 earlier, implying a 17% upside from the Nifty’s last close. The brokerage also lowered the Nifty target multiple to 19x from 20x 1-year forward price-to-earnings ratio.
While India’s fiscal and monetary response hinges on the conflict’s duration and severity, the “earnings impact is a function of how prolonged the supply shutdown is,” analysts led by Surendra Goyal of Citi Research said on Monday.
Citi estimates that three months of supply disruptions could shave off 20-30 basis points off India’s growth in fiscal year 2027, raise inflation by 50-75 bps, widen the fiscal deficit by 10 bps and add $25 billion to the current account deficit.
The Reserve Bank of India is expected to stay on pause in April, with its policy tone potentially tilting toward growth if fiscal measures absorb most of the inflationary pressures, it added.
BROADER SUPPLY SHOCK
The U.S.-Israeli war on Iran, now in its third week, continues to jolt commodity, currency and equity markets globally.
India’s benchmark Nifty 50 and BSE Sensex confirmed a technical correction last week, dropping 10% from record highs, falling about 8% each since the war began as of last close on Friday, while the Indian rupee slid to record lows.
Citi says the war is evolving from a simple energy “price” shock to a broader “quantity” disruption, affecting LPG, LNG, fertilisers, petrochemicals and aluminium, and squeezing input costs and availability for industries from autos and construction to food, pharmaceuticals, paints and shipping.
WORST HIT SECTORS
Fertilisers and petrochemicals are most exposed to the crisis, given India’s dependence on imports from the Middle East, it said.
The brokerage has downgraded autos to “neutral” from “overweight” on risks from crude and gas price spikes and potential semiconductor-related disruptions, dropping automaker Mahindra & Mahindra from its top picks and Mahanagar Gas from its mid-cap top picks