A relief rally is underway on Dalal Street as tensions in the Middle East show signs of easing. The shift in sentiment follows comments from US President Donald Trump, who said Washington was making progress toward ending the conflict. However, Iran’s military has denied that any talks have taken place.
The softer geopolitical tone has pushed crude oil prices lower as a breakthrough could restore shipping through the strategic Strait of Hormuz, which accounts for a fifth of global crude and energy passage. Brent crude oil prices eased 7% to slip below the $100 mark today. This eased macroeconomic concerns for India, which is the third-biggest importer of oil in the world.
The Nifty 50 rose 1.72% today, taking the two-day rally to 3.5%. The rally was broad-based, barring Coal India (down 2%) and Power Grid (up just 0.05%), all index constituents participated in the stock market rebound.
Which stocks led Nifty 50 in two-day rally?
Blue-chip NBFC stock Shriram Finance led the charge as it added almost 10% during the two-day rise.
It was followed by InterGlobe Aviation shares that have rebounded 9% in the last two days amid easing of crude oil prices and hopes that a resolution to the war could restore air travel to normalcy. The aviation stock remains a top pick of Emkay Global to buy to play the stock market recovery, as the brokerage expects the ATF fuel prices to correct and schedule normalisation in the next 2-3 months.
Larsen & Toubro (L&T), which has also taken a heavy beating due to its exposure to the Middle East, gained over 9% in just the last two sessions. The company recently told PTI that it has not seen any major business impact because of the ongoing Middle East conflict, as nearly 95% of the projects are continuing to function. The stock also remains part of Emkay’s top picks to play the market rebound.
Bajaj Finance is also expected to see minimal earnings damage and has jumped 9% during this period. Asian Paints rebounded sharply by almost 8% as the company announced a 6-8% price hike amid rising raw material costs, as oil prices jumped 60% in March. Eternal, meanwhile, gained 7% after announcing a platform fee hike.
HDFC Bank shares reversed their trend after falling for four days as of March 23. India’s biggest private lender had taken a beating after the sudden resignation of part-time chairman Atanu Chakraborty. Analysts have largely retained their bullish views on the stock as the RBI and the bank’s board eased concerns about any corporate governance lapses.
Reliance Industries rose just 1.61% during this period, which was among the bottom five performers, data shows.
Market outlook mixed
Analysts remain mixed on the Indian stock market outlook going ahead, with several global brokerages either slashing targets for the benchmark indices or downgrading their outlooks. UBS was the latest to join Citi and Nomura in tempering its expectations for the Nifty 50.
The brokerage today downgraded India from ‘attractive’ to ‘neutral’. Meanwhile, Citi cut its target to 27,000 from 28,500, and Nomura cut its year-end target for the Nifty 50 to 24,900 from 29,300 earlier this month amid energy supply risks as the US-Iran war entered its fourth week.
On the flip side, Emkay believes that the market has reached its bottom and hence retained its Dec-26E Nifty target of 29,000, based on +1sd PER of 20x. “The short episode is unlikely to derail India’s consumption-led recovery, and we see FY27E Nifty EPSg on track at ~15%.”
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