In less than three months since the onset of the US-Iran war, investors have navigated significant bouts of volatility. The Nifty 50 index is down over 4% since February 27, logging losses of over 1% in 14 sessions during this period, underscoring the high investor pessimism as crude oil prices remain elevated, the rupee in shambles and the foreign selling pressure persistent.
In the trade on Monday, 18 May, the Sensex crashed over 1000 points, and the Nifty 50 slipped to near 27,300 levels as both indices lost another 1% amid no end in sight to the conflict in West Asia, which is beginning to challenge global growth and drive inflation.
The Strait of Hormuz, a critical chokepoint accounting for 20% of the global energy passage, has been shut since February 27 and kept oil above the $100-$110 mark since the end of February. For India, which is the major importer and consumer of crude oil, it remains a key challenge, weighing on the domestic growth, inflation and foreign reserves.
WPI inflation has surged to a 42-month high of 8.3%, with the fuel and power segment skyrocketing to 24.71%. Systematix Equities cautioned that official CPI forecasts will soon align with the more realistic 6–7% range for 2HFY27.
“The mix of slowing growth, widening BoP stress, and sticky inflation will complicate the RBI’s job, likely forcing a sharper rupee breach beyond ₹100 and a reversal of last year’s monetary accommodation,” it added.
What should investors do amid stock market crash?
As the global picture remains murky and the market outlook uncertain, analysts advise investors to remain cautious, hold cash and only consider sectors that remain domestic-focused and relatively insulated from the crisis in the Middle East.
Explaining the key factor around the pressure in the Indian stock market, Mahesh Ojha, Vice President, Research & BD at Kantilal Chhaganlal Securities, said that selling is happening because of uncertainty, not because of much change in fundamentals.
He added that the lack of clarity among world leaders, including US President Donald Trump’s flip-flop on the war with Iran and Prime Minister Narendra Modi’s call for austerity, is adding to the already uncertain environment.
Against this backdrop, he advises against being aggressive. “Investors should wait further and keep cash levels high. Those who want to invest can keep debt allocation higher than equity. Currently, we are on the sidelines and not aggressively buying equity. We are cautiously watching the global front and global developments,” he said.
Given the strong fundamental picture, equities are much lower, according to the expert. It must be noted that even before the onset of the US-Iran war, foreign investors were relentlessly selling Indian stocks, resulting in a sideways movement for the index for almost two years now.
However, he suggested that SIP investors should not worry. “Averaging works in their favour. If you are an SIP investor, you do not need to worry much.” He, however, advised a higher allocation toward debt or liquid funds compared to earlier.
Ajit Mishra of Religare Broking also advised a cautious approach for someone with a shorter horizon.
He said that for short-, medium-, and even long-term investors, investing in one go is not at all advisable because we are not sure how things are going to unfold on the geopolitical front or how long we are going to see this elevated level of crude prices.
He advised those with a time horizon of over one year or longer than that, to nibble selectively in the sectors where we are seeing positive results, or at least where we have clarity — mainly domestic-facing sectors.
In terms of the index, 23,150 is an important support area, said Mishra. “The major support is still around the 22,000 mark. So we still have room on the downside. Investors should plan their strategy accordingly.”
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As for traders, investors said the market view is very clear when it comes to the index: Maintain a negative view until we reclaim the 24,000 mark.
Mishra said that the downside may remain capped, considering have immediate support around 23,150, which is the gap area. “If Nifty fails to hold that level, then probably we are set for the next leg of decline. Otherwise, it could remain more of a consolidation phase.”
Additionally, Ojha said that overnight positions are not advisable in the current scenario. If you are a trader, keep your positions squared off on a day-to-day basis, and if you carry forward positions, then you need to hedge your positions, he added.
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.
