Yet amid the panic, market veterans are urging discipline over capitulation and spotting strategic entry points in the wreckage.
“At the end of the day the war will have an impact on all sectors, a little bit more, a little bit less,” said Dipan Mehta, veteran market analyst. “The smarter ones look for good quality businesses which they were always wanting to buy but they could not buy because valuations were really high and now the entire market has corrected and that provides an opportunity.”
Mehta dismissed the conventional wisdom of fleeing to so-called safe havens. “Actually at the brass tracks all these theories that we should buy safe stocks and all do not really work because your portfolio has to be well diversified and one cannot let go of an opportunity like this, a crisis like this, to look for stocks which like say one year, two years down the line can give great returns.”
Where to deploy cash now
Global brokerages are scrambling to recalibrate portfolios as escalating US-Israel strikes on Iran revive fears of prolonged oil disruption. Morgan Stanley has shifted aggressively toward domestic cyclicals over defensives and external-facing sectors, boosting its overweight on financials by 200 basis points, consumer discretionary and industrials by 300 basis points each.
“We expect a recovery in urban demand to aid overall consumption demand,” Morgan Stanley analysts wrote, adding that “robust government capex and a pickup in private capex drive our overweight” in Industrials. On Financials, they noted “rising credit growth and low credit costs are only partly offset by likely NIM compression.”
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The firm’s focus list includes Maruti Suzuki, Trent, Lenskart, Varun Beverages, Bajaj Finance, ICICI Bank, L&T, UltraTech, Prestige Estates, and Adani Power while recommending underweights in energy, materials, utilities, and healthcare.
Nomura sees immediate winners emerging from oil price volatility. “ONGC and Oil India are the clear winners due to higher average selling prices,” the brokerage noted, while cautioning that “we are also wary of the government imposing windfall tax if oil prices go too high.”
The drone strike on Saudi Aramco’s 550,000 barrels-per-day Ras Tanura refinery, now shut, has sent European diesel margins soaring 26% to their highest since November 2020. “We prefer Oil India as a play on the potential spike in refining GRMs due to disruption in refining operations in the Middle East,” Nomura analysts wrote, estimating roughly 50% of Oil India’s target price derives from its stake in Numaligarh Refinery and IOCL. Reliance could also benefit if attacks on Middle East refining assets intensify.
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Sectors to hide, sectors to hurt
Elara Capital flagged upstream energy companies, precious metals, and domestic-focused sectors like banks and staples as relatively better placed. The brokerage also noted that “NRI activity in India’s real estate may get a fillip if risks of Middle East as an investment destination prolong,” while defence stocks could see sentimental tailwinds.
Emkay Global identified vulnerable names but only if the conflict drags on for three to four weeks beyond their base case. Oil marketing companies may struggle to pass on higher costs, while L&T and KEC International face pressure from large Middle East order books. IndiGo could face cost-price squeeze and flight cancellations, while capital goods, autos, and consumer durables remain exposed if metal prices stay elevated.
For shelter, Emkay pointed to upstream energy (ONGC, Oil India), metals (Hindalco), IT (Infosys, HCL Tech—benefiting from rupee depreciation despite AI concerns), pharma as a classical defensive, and private banks with “relatively inexpensive valuations, positive cycle.
The bigger picture
Analysts emphasize that global risk sentiment remains fragile amid ongoing Middle East tensions, volatile oil prices, inflation concerns, and the specter of higher current account deficit. The rupee’s continued depreciation and incremental foreign outflows are stoking near-term volatility.
Still, historical evidence offers reassurance. Past geopolitical conflicts have triggered shallow, sentiment-led, and temporary corrections in Indian equities rather than deep or sustained drawdowns purely on geopolitical grounds.
Amid all the depressing news, Morgan Stanley’s Ridham Desai issued a report sticking to the base case scenario of Sensex hitting 95,000 by December 2026 and 107,000 in the bull case scenario.
“We think this is more adverse market plumbing and an opportunity to buy high-quality businesses at reasonable prices despite the potential for near-term volatility,” Desai said.
The consensus advice on Dalal Street is to avoid panic selling, adopt a disciplined long-term perspective, and exercise patience over the next several weeks. Investors with high risk appetite and long investment horizons can use this crisis to nibble at high-quality stocks in banking, pharmaceuticals, automobiles, and defence—themes that offer long-term buying opportunities.
“The market was correcting before the war came into place, now we have even a further correction,” Mehta said. “So, the focus has to be more on those businesses where you feel that they can give superlative returns over the next three years or so.”
As missiles continue to arc across Middle Eastern skies, that patience and conviction will be tested. But for those willing to look past the smoke, current price levels may offer a strategic entry point for the medium to long term.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)