The broader market has corrected about 8-10% since the onset of the conflict, with deeper cuts across several sectors, as investors price in the possibility of a prolonged war, higher input costs, and pressure on corporate profitability.
Kotak Equities said the scale of the correction suggests markets are either “extremely concerned about a prolonged war” or are extrapolating short-term disruptions into a permanent earnings hit. The brokerage expects the conflict to persist for weeks rather than months, with tensions lingering but without lasting damage to oil infrastructure. Oil prices, it said, could remain elevated in the near term before stabilising at a higher-than-pre-war range.
That base case has led to limited changes in earnings estimates so far, although risks remain if the conflict drags on. “We note a higher downside risk to earnings… in the case of a prolonged conflict,” Kotak said, adding that the impact will vary depending on companies’ ability to pass on higher costs.
The recent sell-off has nonetheless improved the risk-reward balance across segments of the market. Kotak, however, cautioned that valuations are still not at distressed levels seen during earlier crises such as 2009 or 2020.
Within its preferred basket, the brokerage highlighted a mix of consumption, digital, and manufacturing-linked plays, including DLF, Godrej Consumer, Info Edge, Aadhar Housing Finance, Dr Parth Labs, Eureka Forbes, Jubilant FoodWorks, Embassy REIT, Coforge, Dixon Technologies, and Vishal Mega Mart.
The volatility follows a difficult FY26 for Indian equities. Motilal Oswal described the year as a “near six-sigma” phase marked by geopolitical shocks, including tariffs, supply disruptions, and the Iran conflict, which kept markets volatile. Despite improving domestic earnings trends, India underperformed global peers, falling 14% in dollar terms compared with gains in other emerging markets.The underperformance was driven by relatively better growth visibility in other economies, valuation gaps, and India’s limited participation in the global AI-driven rally, the brokerage said.
However, the recent correction has reset valuations. The Nifty is now trading at around 17.7x forward earnings, a discount to long-term averages, while the premium over emerging markets has narrowed sharply. This, according to Motilal Oswal, creates a “favourable entry point” if geopolitical tensions ease.
Its preferred ideas span market leaders and structural plays such as Bharti Airtel, SBI, ICICI Bank, M&M, Titan, Infosys, IndiGo, and BEL, alongside broader opportunities in Tata Steel, Eternal, Lenskart, TVS Motor, Indian Hotels, AU Small Finance Bank, Dixon Technologies, Coforge, Radico Khaitan, Delhivery, ACME, and Premier Energies.
Elara Securities echoed this view, noting that valuations are now below long-term averages and have historically acted as a “bounce zone” outside extreme crises. With crude prices easing from recent highs and supply concerns moderating, the brokerage sees limited downside from current levels.
Its list of value picks cuts across market caps, with largecaps such as HDFC Bank, L&T, Maruti Suzuki, Axis Bank, Titan, Eternal, Eicher Motors, LTIMindtree, Apollo Hospitals, and Polycab; midcaps including United Spirits, GMR Airports, UNO Minda, IDFC First Bank, and Godrej Properties; and smaller names such as Gland Pharma, Gabriel India, BEML, Ujjivan SFB, and Safari Industries.
Axis Securities’ top picks reinforce the same trend, focusing on beaten-down but fundamentally strong names such as Bajaj Finance, SBI, Kotak Mahindra Bank, Bharti Airtel, Avenue Supermarts, Max Healthcare, Nestlé India, and LG Electronics India, along with mid- and small-cap ideas including Dalmia Bharat, Ujjivan SFB, Chalet Hotels, Minda Corporation, Navin Fluorine, and Kalpataru Projects.
Emkay also expects the war-related volatility to be short-lived in terms of economic impact. It maintained its December 2026 Nifty target of 29,000 and expects earnings growth of about 15% in FY27, supported by a consumption-led recovery. “The short episode is unlikely to derail India’s recovery,” the brokerage said, adding that several beaten-down stocks now offer attractive entry points.
Its recovery basket includes cyclicals and rate-sensitive plays such as L&T, HDFC Bank, Bajaj Finance, Shriram Finance, IndiGo, and Ashok Leyland, which have corrected sharply on near-term concerns.
Global brokerage UBS has also identified stocks that could navigate the oil shock, including Reliance Industries, Bharti Airtel, NTPC, Sun Pharma, Adani Ports, Hindalco, Godrej Consumer Products, ICICI Bank, Apollo Hospitals, and SBI Life Insurance. These names reflect a mix of commodity beneficiaries, defensives, and consumption-linked plays with pricing power.
Across brokerages, the common thread is a shift toward earnings resilience and valuation comfort. Financials, telecom, industrials, and select consumption plays dominate recommendations, while commodity-linked names are being selectively added as hedges against sustained oil volatility.
At the same time, the current environment has exposed vulnerabilities. Rising oil prices remain a key macro risk, with potential implications for inflation, margins, and interest rates. Export-oriented sectors could also face pressure from higher logistics costs and currency volatility.
Still, brokerages broadly agree that the market correction has already priced in a significant portion of these risks. The key trigger for a sustained recovery would be clarity on the trajectory of the Iran conflict and stabilisation in crude prices.
Until then, volatility is likely to persist, with markets reacting to geopolitical developments. But with moderating valuations and expected earnings growth continuing into FY27, the current phase is increasingly being viewed as an accumulation opportunity rather than a structural downturn.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
