Indian equity markets staged a strong recovery on Monday, March 16, with benchmark indices Sensex and Nifty posting solid gains after recent losses triggered by global uncertainty.
At the close of trading, the BSE Sensex surged 938.93 points (1.26%) to settle at 75,502.85, while the Nifty 50 climbed 257.70 points (1.11%) to finish at 23,408.80, reclaiming the key 23,400 level.
The rally was driven by buying in several heavyweight stocks across major sectors, helping markets recover from last week’s sharp correction.
Sector Performance
Sectoral indices showed mixed trends during the session.
- Auto, banking, FMCG, and metal stocks recorded gains ranging between 0.3% and 1%.
- On the other hand, media, oil & gas, pharma, real estate, and capital goods stocks faced selling pressure, declining 0.5% to 2.7%.
Despite the benchmark rally, the broader market remained cautious. The Nifty Midcap index slipped 0.3%, while the small-cap index declined 0.5%, reflecting continued investor caution in riskier segments.
Brokerages Cut Market Targets
The recovery comes at a time when global uncertainties are increasing due to the escalating conflict in the Middle East. Major global brokerages have revised their outlook for Indian equities as risks tied to oil prices and supply chains intensify.
Citi Research lowered its year-end target for the Nifty 50 to 27,000, down from its earlier estimate of 28,500. Even after the revision, the brokerage still expects around 17% potential upside from current levels.
Citi also reduced its valuation assumption, lowering the expected price-to-earnings multiple to 19 times one-year forward earnings, compared to the earlier 20 times estimate.
Meanwhile, Nomura adopted a more cautious stance by cutting its Nifty target to 24,900 from 29,300, suggesting a potential upside of roughly 7.5% based on current levels.
Rising Geopolitical Risks
Analysts say the revisions reflect growing concerns that geopolitical tensions could disrupt global energy markets.
According to Nomura analyst Saion Mukherjee, the current crisis could have a greater impact than earlier conflicts such as the Russia–Ukraine war because of the strategic importance of the Strait of Hormuz.
The route accounts for approximately 20–25% of global oil and LNG trade, compared with 8–10% linked to Russian energy supplies.
Potential Economic Impact
Citi Research warned that prolonged disruption to energy supplies could affect India’s economic outlook.
If the supply shock continues for three months, the brokerage estimates that India’s GDP growth for FY2027 could decline by 20–30 basis points.
Other possible effects include:
- Inflation rising by 50–75 basis points
- Fiscal deficit widening by about 10 basis points
- Current account deficit increasing by nearly $25 billion
Despite these risks, Citi expects the Reserve Bank of India (RBI) to keep interest rates unchanged during its upcoming April monetary policy meeting. The central bank may prioritise economic stability if fiscal measures help offset inflationary pressures.
Supply Shock Across Multiple Industries
The ongoing conflict involving the United States, Israel, and Iran has entered its third week, creating volatility across global financial and commodity markets.
Since the conflict began, both the Nifty 50 and Sensex have fallen around 8%, entering a technical correction after dropping roughly 10% from their record highs. The Indian rupee has also weakened to record levels during this period.
Analysts believe the crisis is evolving into a broader supply shock affecting multiple industries simultaneously.
Vulnerable Sectors
Industries that rely heavily on imported raw materials may face the most pressure. These include:
- LPG and LNG
- Fertilisers
- Petrochemicals
- Aluminium
Among these, fertiliser and petrochemical companies are considered particularly vulnerable because India imports a significant share of these inputs from the Middle East.
Citi has also downgraded the automobile sector to “neutral,” citing risks from higher crude oil prices, natural gas costs, and potential semiconductor supply disruptions.
As part of its revised outlook, the brokerage removed Mahindra & Mahindra from its top stock picks and dropped Mahanagar Gas from its preferred mid-cap list.
Outlook for Markets
With geopolitical tensions showing no clear signs of easing, analysts believe Indian equities may continue to experience volatility in the near term.
Nomura has even warned of a possible additional 5% correction, particularly in mid-cap and small-cap stocks, which could face stronger selling pressure if global supply disruptions persist.
Originally published on 24×7-news.com.
