The Indian equity market is likely to open on a cautious note amid fresh escalation of tension in West Asia. Massive selling by FPIs and the weakening of the rupee continued to hurt market sentiment, analysts said.
Ponmudi R, CEO of Enrich Money, said Overall, investor sentiment remains cautious and highly sensitive to geopolitical developments. The prolonged U.S.–Iran standoff, the rebound in crude oil prices and continued foreign fund outflows continue to shape the near-term market narrative.
“While energy prices remain below their recent peaks, any further escalation in regional tensions or sustained foreign selling could weigh on risk appetite and increase downside risks. Conversely, meaningful progress on the diplomatic front would likely improve sentiment, support a recovery in risk assets and provide greater visibility for markets navigating an uncertain global backdrop.,” he added.
The A gift Nifty at 23,245 suggests Nifty may open with a gap down of over 200 points.
Valuations offer support despite near-term risks
However, analysts see stability in the market due to strong macro numbers, including better-than-expected , auto sales, and fiscal deficit figures. Fundamentally, valuation turned relatively attractive, said experts.
According to Motilal Oswal Financial, the Nifty is trading at a 12-month forward P/E of 18.6x, below its LPA of 21x (an 11% discount). Further, its P/B of 2.7x represents a 5% discount to its historical average of 2.9x. The 12-month trailing P/E for the Nifty, at 21.5x, is below its LPA of 23.2x (at a 7% discount). At 3x, the 12-month trailing P/B ratio for the Nifty is below its historical average of 3.2x (at a 4% discount).
- Read:
“The Nifty-50 registered a modest 5% EPS growth in FY26 (following a 16%+ CAGR during FY20-25). Following India’s sharp underperformance in FY26 and record FII outflows, a favourable base has likely been set for Indian equities. However, in the near term, the market will remain hostage to volatile developments arising from the West Asian crisis. Higher commodity prices will be the key monitorables, as a prolonged elevated level could affect India’s macro parameters and engender a tight monetary policy stance,” the domestic brokerage added.
Fiscal position and industrial growth remain supportive
Aditi Nayar, Chief Economist, ICRA Ltd, said, “The Government of India’s (GoI’s) trailed the Revised Estimate (RE) for FY2026 by Rs. 0.4 trillion, aided by a Rs. 0.6 trillion expenditure cut, which more than offset the marginal miss on the receipts front. This enabled the fiscal deficit to be contained at 4.4% of GDP in FY2026, in line with the fiscal target, notwithstanding the downward revision in nominal GDP prints.
“Interestingly, the inflows on account of savings deposits and certificates and PPF exceeded the RE by Rs 1.0 trillion, higher than our expectations. This led to a increase in the cash balance of the GoI, as against the Rs. 457 billion drawdown that was envisaged as per the RE. This is expected to provide some cushion to the GoI’s fiscal position in FY2027, and prevent any fiscal slippage from translating into an equivalent increase in market borrowings,” she added.
On IIP data, she said, The new series has factored in several changes, including a revision of the item basket, changes in sectoral weights, and an increase in the number of reporting factories. Interestingly, as per this, industrial output expanded at a relatively higher pace in FY2024 and FY2025 than previously estimated, with the manufacturing sector in particular reporting much higher growth rates in both these years. “This could lead to some upward revision in the GDP estimates for these years, when the revised data for the same is released later this week.”
Derivatives signal cautious undertone
From a derivatives perspective, the setup remains cautious. According to Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities, the PCR stands at 0.49, indicating an oversold derivatives structure and heavy call-dominated positioning. “Significant call open interest is concentrated in the 23,500–23,600 strike zone, creating a strong resistance band, while Put writers continue to defend the 23,000–23,200 region, establishing an important support base. The Max Pain level is placed near 23,500,” he added.
Meanwhile, most equities across the Asia-Pacific region are down in early trading on Tuesday.