Expert view: The Indian stock market is reeling under intense pressure from the US-Iran war, which has driven crude oil prices to above the $100 mark. This is a pain point for not just Dalal Street but also the Indian economy, as it can fan inflation, derail fiscal math and pressurise the Indian rupee.
Amid this setup, Somil Mehta, Head of Retail Research, Mirae Asset Sharekhan, shares the possible impact on Nifty 50 earnings, which only improved in the last quarter following a prolonged subdued trend. He also highlights the top sectoral bets and ideal portfolio strategy. Edited excerpts:
Indian stock market is facing the impact of rising crude oil prices amid US-Iran conflict. How much of an earnings impact do you foresee?
Nifty 50 earnings are currently expected to grow around 12–14% in FY27, supported by stable economic growth and improving corporate profitability. However, if crude oil prices remain elevated in the $85–$90 range for the next two months, earnings growth expectations may be revised lower to around 10%. Higher energy costs increase input expenses for several sectors, which could pressure margins and reduce overall earnings growth across companies in the Nifty index.
What implications do you see for FII flows into India amid the Middle East conflict?
A sustained rise in crude oil prices increases India’s import bill, since the country imports a large portion of its oil requirements. This can widen the current account deficit and put pressure on the Indian rupee. A weaker rupee may reduce the attractiveness of Indian assets for foreign institutional investors (FIIs), as currency depreciation affects their returns. As a result, FIIs may turn cautious or reduce exposure to Indian equities in search of better returns elsewhere.
IT stocks faced one of the worst monthly declines last month, though there are signs of green shoots now. Is the worst over?
The IT sector currently looks attractive from a valuation perspective, as many stocks are trading at relatively lower levels compared to earlier years. However, uncertainty around the impact of artificial intelligence (AI) on the industry remains a concern. While Indian IT companies are expected to adapt to technological changes, clarity on how AI will influence business models and revenues is still evolving. Investors may consider gradual value-based investing once there is better visibility on AI adoption and its long-term impact.
What portfolio allocation strategy would you recommend for retail investors in the current market environment?
The Nifty is currently trading at around 21 times earnings, while forward valuations are closer to 18–19 times, which offers a reasonable entry opportunity for long-term investors. In the current environment, portfolios should focus more on large-cap companies with strong balance sheets and stable earnings visibility. Exposure to mid- and small-cap stocks can be limited for now due to higher volatility. Key sectors that continue to look attractive include defence, pharma, and banking & financial services.
Nifty has not really moved in the last 18 months. Do you think it can impact SIP inflows?
Even though Nifty returns have been relatively modest over the past two years, systematic investment plan (SIP) flows are expected to remain strong. Many experienced investors use market corrections as opportunities to accumulate units at more attractive valuations. This disciplined investment approach helps improve long-term returns and reduces the impact of short-term market volatility. As a result, domestic liquidity through SIPs is likely to continue providing steady support to the equity markets.
Which sectors look most attractive from a 2–3 year investment perspective right now?
In the current geopolitical environment, investors are increasingly focusing on defensive and structurally strong sectors. Industries such as defence, pharma, capital goods, and banking are expected to remain relatively resilient. Defence and capital goods benefit from strong government spending and long-term order visibility, while pharma offers stability during uncertain periods. Banking and financial services continue to be supported by improving balance sheets, steady credit growth, and stronger fundamentals across the sector.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
