A strong wave of buying engulfed the Indian stock market on Wednesday, April 1, lifting the benchmarks- the Sensex and the Nifty 50- more than 2% each during the session.
After a steep 11% in fall in March, the domestic market is witnessing a relief rally amid emerging signals indicating the US-Iran war will likely end in the near future. US President Donald Trump said Washington may end its military attacks on Iran within two to three weeks.
Trump’s comments cheered markets globally as the West Asian war and the resulting soaring energy prices raised fears of an inflation flare-up and of growth losing steam, dealing a heavy blow to investor risk appetite.
Is the worst behind?
The market is reacting to positive news flows about the US-Iran war. While the worst of the war could be over, it appears to be too early to conclude that the market will see a sustained rally from here on. This is because crude oil prices are still above $100 per barrel.
Brent crude prices crashed 4% but traded slightly above $100 per barrel. This remains a major concern for the Indian economy as India imports about 85-90% of its total oil requirements.
“I feel it is too early to rely on the statements, as they change overnight. While the volatility index, India VIX, has witnessed a dip today, it is still at an elevated level, and Brent is still hovering above $100,” said Ajit Mishra, SVP of Research at Religare Broking.
“We need a sustained decline in crude as a confirmation, and then rate sensitivities can witness a swift rebound,” Mishra said.
What should investors do?
Despite persisting uncertainties, experts believe that for long-term investors, this could be the time to buy quality stocks and look at sectors that have seen massive losses.
“The emerging geopolitical risks appear to be intermittent in nature, and given India’s overall positioning in terms of energy supply sources and its cordial relations with the majority of Middle-East nations, we believe that India is well placed to navigate through the difficult times for whatever duration it lasts,” said Abhisar Jain, Head and Fund Manager, Monarch AIF.
“We continue to remain positive on India’s growth story, and our analysis indicates that a trifecta of factors (resilience of corporate balance sheets + rate cuts + reforms) would likely lead to a sharp recovery in the broader markets going ahead,” said Jain.
Top sectors and stocks to buy
VK Vijayakumar, chief investment strategist at Geojit Investments, believes the sectors that have been beaten down excessively over the last month will be the ones to bounce back.
He said financials have the potential to bounce back smartly. This sector has a fundamental strength of attractive valuations.
“Leading private sector banks have been beaten down disproportionately by sustained FII selling and shorting on expectations of further selling by FIIs. This segment is a good medium-term call,” said Vijayakumar.
Besides, Vijayakumar believes the defence sector will remain in the global spotlight due to ongoing wars.
“Indian defence stocks, including defence-related shipping stocks, are looking positive,” Vijayakumar said.
The Indian auto and auto ancillary sectors are on the cusp of sustained growth for a long period. Valuations in the sector are now fair. IT is now a good tactical trade. The Q4 results will be good, Vijayakumar added.
Jain said he is bullish on power, power transmission and utilities sectors as they may get more impetus from the government for faster execution and buildouts domestically to build self-reliance on energy.
Uttam Kumar Srimal, Senior Research Analyst at Axis Securities, is positive on the consumption and auto sectors. From these sectors, he recommends buying DMart and Bajaj Auto.
“With India’s GDP growth holding steady at 7.8% and private consumption expenditure reaching ₹48 lakh crore, retail and mobility are non-discretionary winners. Bajaj Auto’s export recovery and DMart’s rapid store expansion capitalise on this domestic insulation,” said Srimal.
For DMart, Srimal has a target price of ₹4,400, and for Bajaj Auto, the target price is ₹10,790.
Moreover, Srimal is positive on the banking and infra sector also and suggests SBI (target price: ₹1,280) and Hindalco (target price: ₹1,050) as two stocks from these sectors.
“SBI’s record-low NPAs and Hindalco’s strategic position in the aluminium supply chain make them the primary beneficiaries of the government’s ₹12.2 trillion capital expenditure push. As the industrial cycle accelerates, these heavy lifters typically lead the market recovery,” said Srimal.
From the telecom space, Srimal recommends Bharti Airtel (target price: ₹2,530), citing Bharti Airtel’s successful push for a ₹250+ ARPU, which demonstrates immense pricing inelasticity.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
