Brokerages Citi Research and Nomura have trimmed their year-end targets for the Nifty 50, citing rising risks to growth and corporate earnings as surging oil prices and supply shocks from the escalating West Asia war darken the outlook for India’s economy.
Citi cut its target to 27,000 from 28,500, implying a 17 per cent upside from the Nifty’s last close. The brokerage also lowered the index’s target multiple to 19 times from 20 times one-year forward earnings.
Nomura cut its year-end target for the Nifty 50 to 24,900 from 29,300, implying a potential upside of 7.5 per cent.
“The current geopolitical escalation is more concerning than the Russia-Ukraine conflict as the Strait of Hormuz accounts for 20 per cent-25 per cent of global trade in oil and LNG vs Russian supplies of 8 per cent-10 per cent,” said Saion Mukherjee, analyst at Nomura.
A further correction of 5 per cent is a “distinct possibility” in the near term, with small- and mid-cap stocks at a relatively greater risk as there are no signs of the disruptions ending at the moment, Nomura said.
Citi estimates that three months of supply disruptions could shave off 20-30 basis points off India’s growth in fiscal year 2027, raise inflation by 50-75 bps, widen the fiscal deficit by 10 bps and add $25 billion to the current account deficit. The Reserve Bank of India is expected to stay on pause in April, with its policy tone potentially tilting toward growth if fiscal measures absorb most of the inflationary pressures, Citi added.
BROADER SUPPLY SHOCK
The US-Israeli war on Iran, now in its third week, continues to jolt commodity, currency and equity markets globally. India’s benchmark Nifty 50 and BSE Sensex confirmed a technical correction last week, dropping 10 per cent from record highs, falling about 8 per cent each since the war began as of last close on Friday, while the Indian rupee slid to record lows. Citi says the war is evolving from a simple energy “price” shock to a broader “quantity” disruption, affecting LPG, LNG, fertilisers, petrochemicals and aluminium, and squeezing input costs and availability across industries.
WORST HIT SECTORS
Fertilisers and petrochemicals are most exposed to the crisis, given India’s dependence on imports from West Asia, Citi said.
It also downgraded autos to “neutral” from “overweight” on risks from crude and gas price spikes and potential semiconductor-related disruptions, dropping automaker Mahindra & Mahindra from its top picks and Mahanagar Gas from its mid-cap top picks.