A day after the US-Iran ceasefire triggered the Indian benchmark indices’ best intraday gain in five years, the trend on Dalal Street reversed. Lingering war clouds and doubts over the durability of the two-week ceasefire lifted crude oil prices and heightened investor caution, pushing the Sensex and Nifty lower by over 1% on Thursday, April 9.
The Sensex fell over 1,000 points, or 1.3%, to 76,557, while its NSE counterpart, the Nifty 50, declined 257 points, or 1.07%, to 23,740.
The Strait of Hormuz remained largely blocked, while Israeli attacks on Lebanon threatened to derail the fragile ceasefire in the Middle East, denting global investor sentiment. The key oil transit route, which accounts for nearly 20% of the world’s energy flows, has effectively remained shut since February 28, fuelling crude prices and inflation concerns.
Reopening the Strait was a key part of the ceasefire agreement. US President Donald Trump said on Wednesday that military ships and aircraft would remain positioned around Iran, warning Washington would resume action unless Tehran fully complied. Meanwhile, Iran called it “unreasonable” to pursue talks with the US after Israel carried out its heaviest strikes yet on Lebanon.
Should you buy the dip?
After Wednesday’s relief rally and amid conflicting signals from the West Asia conflict, investors remain cautious about buying the dip, with geopolitical uncertainty still elevated.
G Chokkalingam, Founder and Head of Research at Equinomics Research, said one should 100% buy on dips because, as you saw yesterday, whenever good news comes, you do not get a chance; everything opens 4% to 10% higher.
But that is not the only reason why the market veteran recommends this strategy. He believes that the impact on the global economy could ramp up efforts to find a resolution to the US-Iran war, which could revive the markets. Additionally, valuations have become conducive to buying at current levels.
“The war has cost the entire global economy. Inflation is rising in all major economies—the US, Europe, India, everywhere—so pressure is building up. Around 35 countries have joined together to call for a ceasefire, so it would be very difficult for Israel to continue with this kind of attack. Considering all this, I have a firm view that this will come to an end soon,” said Chokkalingam.
On the valuation front, the market is also appearing attractive. Sensex P/E has come down to the 20–21 range, whereas the 5-year average before the correction was around 24. The market cap-to-GDP ratio, after reaching 152% in September 2024 at its peak, is now around 112%–115%.
“Considering all that, and also the relatively cheap valuations of small- and mid-cap stocks, I think one should buy in such situations, because the medium- to long-term outlook looks good,” opined Chokkalingam.
However, investors should remain selective and not go all in. Harshal Dasani of INVasset PMS, said that the dip does present a tactical buying opportunity, but the fragility of the ceasefire warrants a measured approach rather than aggressive positioning.
“Markets have already priced in a partial de-escalation, and any reversal could quickly reintroduce volatility, particularly through crude oil and currency channels. That said, liquidity conditions remain supportive and domestic macros are relatively resilient, which limits downside risks,” he added.
Markets are unlikely to rerate sharply without earnings upgrades, but current valuations do support a gradual, earnings-led recovery, according to him.
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.
