Indian stocks face grim future; Energy imbalance, deepening conflict cut earnings forecast

West Asia’s raging conflict shredded Indian equities as rocketing oil prices depressed prices, pushed the Rupee to a record low and put a question mark on Q4 earnings growth even as fewer investors hunted for value in the world’s worst performing equity market. An uptick may be months away.

Dalal Street suffered its nastiest March in six years as the Nifty plunged 11.3 percent, or 2,800 points, to a one-year low. Moreover, bears have gouged a 15 percent cut on this 50-share benchmark index since February 3, when it kissed a fresh record after the Indo-US trade deal was announced.

Investors lost Rs 51 lakh crore worth of wealth in March, more than the GDP of India’s top state, Maharashtra, as Bears reigned supreme on Dalal Street. April may see markets hit bottom as they did in the previous two years.

As a consequence, fund managers and equity strategists have downgraded Indian equities on fears that New Delhi’s surging oil import bill may derail growth, expand trade deficit and cut earnings at Asia’s fastest growing economy, which imports around 85 percent of its energy needs.

“Oil may range between $100-$120 for the rest of the year and that will cut the Nifty EPS forecast to flat growth,” said Nischal Maheshwari, a seasoned equities watcher. “We hope the market will bottom out in April just as it has down in the previous two years.”

Meanwhile, the United States and Israel continued to pound Iran as the Middle East war entered its second month, pushing crude oil prices to 44-month highs and throwing the global energy supply in a tailspin. Countries from Western Europe to Japan and Australia are placating citizens as they grapple with doubling costs of oil imports, drying petrol bunks and dislocated supply chains.

Dark Clouds

Corporate India delivers its January-March earnings starting April first week where the true impact of the 2-month conflict will be visible on Profit & Loss accounts. March saw the government ration commercial LPG to factories as scarce gas was supplied to homes to keep voters happy ahead of two state elections.

Ironically, India remains the lone country that has not raised retail pump prices despite its oil basket hitting $150 a barrel, nearly twice what it was 3 months ago. It’s ships bearing crude oil and LPG are still traversing the Straits of Hormuz as the nation’s diplomatic corps works overtime to feed refineries and keep kitchen fires burning.

Nifty’s trailing PE multiple is now seen around 17, close to the 10-year average where strong buying has traditionally emerged. Yet, each session brings more pain for investors as foreigners press heavy equity sales to partially offset the declining Rupee, which fell 4.1 percent versus the Dollar in March.

Analysts expect 2026 to be a quiet year for stocks after the Nifty posted annual gains in each of the last 10 years. Many an index and hundreds of shares were trading well above their long term valuations as new investors pumped up equities during Covid and subsequently with record monthly inflows.

Despite the gloom and doom, there is still a silver lining for weary investors. India’s PSU energy stocks are in a sharp uptrend as record oil prices buoy profits at ONGC and Oil India. The nation’s largest coal producer is in heavy demand as the government kicks up coal production to offset commercial LPG and keeps furnaces burning.

“Earnings visibility is seen in sectors such as Defence, Pharma and the power space,” said Mumbai-based Maheshwari. “The Nifty may bottom out somewhere between 21,200-21,600.”

Analysts advise investors not to stop monthly SIPs into equity diversified funds as consistent buying to relatively lower prices create higher compounding returns in the longer term.

“Crashes are the best classrooms. But for long-term investors, the playbook doesn’t change, corrections are when you build positions, not abandon them,” said Dhirendra Kumar, Founder-CEO at Value Research.  

“April may still be choppy as markets digest global tariff uncertainties and FII flows, but the underlying earnings recovery story for India remains intact. Investors should focus on asset allocation discipline rather than trying to time the bottom.”