US-Iran war: Brokerage firm BNP Paribas, in its latest report titled ‘India Strategy’, said that it has trimmed its Nifty target for 2026 by 11%, down to 25,500 from the earlier estimate of 29,500, as the crude oil shock weighs on earnings outlook.
“Our optimism about the Indian Equities 2026 outlook has moderated. The Middle East conflict and the resulting oil spike are the cause, and the ceasefire, while welcome, is not a clearance event. History suggests the aftereffects of an oil shock linger for a few quarters even after the prices normalise, as India’s experience in 2008, 2011 and 2022 demonstrates,” the brokerage said.
The firm said that the projected earnings growth for CY26 has been revised down sharply to 11.6% from 17.5%, with estimated EPS now pegged at ₹1,237.
FY27E seemed like an earnings recovery year. However, if oil sustains at USD85-90, it could still strain the macro and, in turn, hurt earnings. The impact of AI on services, employment and discretionary consumption is an independent headwind that will outlast the oil shock, it added.
“Our base case returns imply that will trade at 18.2x CY27E EPS as of Dec 26. This is lower than the 10Y average of 18.6x. Our Nifty 50 target implies a 7% return for 2026 from current levels,” the firm said.
The report further highlighted that rising crude oil prices may put pressure on India’s fiscal and trade balances, which could lead to reduced government spending and weaker consumption.
In this context, the brokerage has revised its sectoral outlook, leaning toward defensive sectors and those that typically perform well when crude prices are high.
It favours segments like staples, telecom, and utilities for their resilience, while continuing to prefer private sector banks over PSU lenders and NBFCs. IT services are also viewed as attractive following recent corrections, supported by favourable currency movements.
Meanwhile, sectors vulnerable to higher input costs—such as automobiles, cement, and consumer durables—are likely to remain under pressure, the brokerage firm said, adding that the infrastructure sector may also encounter challenges amid a potentially tighter fiscal environment.
Indian stock market performance in 2026 so far
The had a weak start to 2026, with large-cap stocks falling around 9% and lagging behind mid- and small-cap indices, which have declined by roughly 5–6%, according to the data given in the report.
“Consensus earnings estimates have not yet been lowered, but we believe the correction is factoring in a cut in estimates as well as a valuation multiple de-rating to some extent,” it said.
On Wednesday, the Indian stock market opened sharply higher, tracking gains in global markets amid renewed optimism around the resumption of US-Iran peace talks. The surged 1,133.53 points, or 1.48%, to open at 77,981.10, while the Nifty 50 advanced 321.15 points, or 1.35%, to 24,163.80. The Bank Nifty index also began the session on a strong note, rising 738.40 points, or 1.33%, to 56,343.45.
BNP Paribas’ stock recommendations
The brokerage firm has listed over 15 stocks to buy in 2026 with up to 88% upside potential, amid ongoing uncertainty in the Middle East.
1] Mahindra & Mahindra – Target Price: ₹4,050 | Upside: 28%
2] Infosys – Target Price: ₹1,730 | Upside: 30%
3] Persistent Systems – Target Price: ₹6,330 | Upside: 16%
4] Britannia Industries – Target Price: ₹6,800 | Upside: 24%
5] Eternal – Target Price: ₹420 | Upside: 77%
6] Doms Industries – Target Price: ₹2,950 | Upside: 23%
7] Titan – Target Price: ₹5,070 | Upside: 14%
9] Amber Enterprises – Target Price: ₹8,280 | Upside: 20%
10] Ultratech Cement – Target Price: ₹13,600 | Upside: 19%
11] Bharti Airtel – Target Price: ₹2,500 | Upside: 34%
12] HDFC Bank – Target Price: ₹1,500 | Upside: 88%
13] ICICI Bank – Target Price: ₹2,040 | Upside: 59%
14] Axis Bank – Target Price: ₹1,720 | Upside: 30%
15] SBI Life Insurance – Target Price: ₹1130 | Upside: 50%
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.