The Indian stock market witnessed a sharp rebound on Tuesday, with the benchmark indices, Sensex and Nifty 50 surging over 2% each, following a relief rally in global markets amid signs of de-escalation in the US-Iran war.
The gains in the Indian stock market today were supported by the remarks from the US President Donald Trump hinting at a temporary de-escalation in the war after he extended his deadline for Iran to reopen the Strait of Hormuz. The US will also hold off striking Iranian power plants for five more days.
While Trump said that the US envoys have been holding talks with a “respected” Iranian leader, the officials of the Islamic republic denied any such negotiations. Thus, uncertainty in the financial market still prevails.
There is still some uncertainty as the Strait of Hormuz is closed, though peace looks highly likely now, analysts expect.
“We see it as a strong positive for India and expect the Nifty 50 to rebound after a 5% collapse in the last three trading sessions. OMCs, private banks, NBFCs, and autos are the best ways to play the recovery,” said Seshadri Sen, Head Of Research And Strategist at Emkay Global Financial Services Ltd.
The probability of peace is significantly elevated and the markets are expected to aggressively price that in. India would be a bigger beneficiary relative to other global markets because of its high exposure to imported crude.
Once clarity emerges, Sen expects Brent crude oil prices to retrace to $75-80 per barrel from near $103 now.
Market recovery likely
The Nifty fell 5% in the last three trading sessions, primarily owing to sustained FPI selling.
“We expect this trend to reverse, and India could emerge as one of the better investment opportunities in the region. The key catalysts are the crude price overhang waning and P/E premium contracting,” Sen said.
He expects the optimism should spill over into other asset classes too, with the rupee likely to bounce back to pre-war levels of ₹91 per USD, and the 10-year bond yields to also drop to ~6.65% from 6.83% currently.
“It may take 2-3 months for the economy to normalize, but asset markets will discount the peace dividend immediately,” Sen said.
Impact on Q4 Results
Emkay Global expects some impact on Q4FY26 earnings, with a spillover to Q1FY27. Supply chains are likely to take 1-2 months to normalize after the Strait of Hormuz reopens. Moreover, the damage to some of the energy infrastructure in the Middle East could delay the full normalization of oil markets.
“We estimate the earnings impact on the Nifty at 1-2% (FY27E). SMID companies may see a larger downgrade, but it would mainly be restricted to 1-2 quarters, with a smaller impact on FY27 estimates. Notably, the street is yet to react to the war, with both Nifty 50 and broader market estimates unchanged in March 2026,” Sen said.
Emkay Global analysts see this as the bottom for the markets and maintain the December 2026 Nifty 50 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 EPS growth on track at ~15%,” said Sen.
Stocks to buy
Emkay Global has identified its top ideas to capitalise on the ongoing market recovery from a basket of stocks that have been among the worst performers since February 26, 2026.
The brokerage prefers oil marketing companies (OMCs), citing a short war duration that is likely to keep the earnings impact manageable, with valuations currently trading below long-term averages on a price-to-book value (PBV) basis.
It also remains constructive on Larsen & Toubro (L&T), which has declined 22% but faces limited risk to its Middle East project pipeline.
Among financials, HDFC Bank, down 16%, is seen as an attractive opportunity, with the stock trading at around 1.5x PBV and having overreacted to the chairman’s resignation. Bajaj Finance share price has fallen 16%, and is expected to see minimal earnings disruption.
Shriram Finance share price has fallen 19%, which appears oversold amid concerns around a potential fuel price hike. InterGlobe Aviation (IndiGo), down 18%, is likely to benefit from a correction in aviation turbine fuel (ATF) prices and normalization of flight schedules over the next two to three months.
Ashok Leyland, which has declined 23%, has been weighed down by concerns around diesel price hikes, though these worries now appear largely priced in.
Meanwhile, Emkay Global expects some of the recent “protection” trades to reverse, noting that sectors such as technology, along with stocks like Reliance Industries and ONGC, may face relative underperformance going ahead.
Disclaimer: 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.
