US-Iran war hits stock market: Citi, Nomura cut Nifty50 target prices; here’s the outlook
US-Iran war shock for stock markets: Brokerages Citi Research and Nomura have lowered their year end forecasts for the key benchmark index Nifty50, pointing to growing risks to economic growth and corporate earnings as rising oil prices and supply disruptions linked to the intensifying Middle East conflict cloud the outlook for Asia’s third largest economy.Citi has revised its Nifty target to 27,000 from the earlier estimate of 28,500. The new projection suggests a potential upside of about 17 percent from the index’s last closing level. The brokerage also reduced the target valuation multiple for the index to 19 times one year forward earnings, compared with its earlier assumption of 20 times.Nomura has also trimmed its year end forecast for the Nifty 50, lowering the target to 24,900 from 29,300. The revised estimate implies a possible upside of around 7.5 percent.Also Read | Crude shock for stock markets! Investors lose Rs 34 lakh crore since start of US-Iran war; where should they put money now?“The current geopolitical escalation is more concerning than the Russia-Ukraine conflict as the Strait of Hormuz accounts for 20%-25% of global trade in oil and LNG vs Russian supplies of 8%-10%,” said Saion Mukherjee, analyst at Nomura according to a Reuters report. Nomura added that a further correction of about 5 percent in the near term remains a distinct possibility. It warned that small and mid cap stocks could face greater downside risk as there are no clear signs that the disruptions will end anytime soon.Citi estimates that if supply disruptions continue for three months, India’s economic growth in fiscal year 2027 could decline by 20 to 30 basis points. According to the Reuters report, the brokerage also expects inflation to rise by 50 to 75 basis points, the fiscal deficit to widen by around 10 basis points and the current account deficit to increase by about $25 billion.Citi added that the Reserve Bank of India is likely to keep interest rates unchanged in April. However, the central bank’s policy stance could lean more toward supporting growth if fiscal measures are able to absorb much of the inflationary pressure.The US-Israeli conflict with Iran, now in its third week, has continued to unsettle global commodity, currency and equity markets.Benchmark indices, Nifty50 and BSE Sensex, confirmed a technical correction last week after falling 10 percent from their record highs. Since the conflict began, both indices have dropped about 8 percent as of last Friday’s close, while the Indian rupee has weakened to record low levels.Citi said the conflict is no longer just an energy price shock but is gradually turning into a wider supply disruption. According to the brokerage, the impact is extending beyond crude oil to products such as LPG, LNG, fertilisers, petrochemicals and aluminium, increasing input costs and tightening supply across industries.Citi said fertilisers and petrochemicals are among the sectors most vulnerable to the crisis due to India’s reliance on imports from the Middle East.The brokerage also lowered its rating on the automobile sector to “neutral” from “overweight”, citing risks from higher crude and gas prices as well as the possibility of semiconductor supply disruptions. It removed automaker Mahindra & Mahindra from its list of top picks and dropped Mahanagar Gas from its preferred mid-cap selections.
