Mark Matthews, a seasoned market strategist from Julius Baer notes, “How soon before markets begin to digest it? They are digesting it now. We can see the Asian markets. The Japanese stock market, for example, was up as much as 17% in late February; now it is flat on the year. So, we are pricing in this high oil price right now.”

When asked about the potential impact on India, Matthews said, “Last year was a very good year for markets like Japan, China, and the US, but India did not do much. So, there should not be as much downside for India. Of course, you could make the case that India uses more oil than some of those other economies or has to import more, but the Indian economy, like most economies in the world, has become more efficient in its oil usage. The pain point which used to be $80 a barrel is now probably around 100. The good news is that India is now able to buy Russian oil again, which takes some pressure off. But really, for India and the rest of the world, it all depends on how long this war lasts.”

Foreign investor sentiment toward India remains cautious but opportunistic. Matthews explains, “There was a breakout in emerging markets versus the US in February of a very long downward trend channel, it had been in place for more than maybe 15 years. But it was a false breakout because last week emerging markets went down more than the US. In general, they are more vulnerable to high oil prices. Most of the oil that goes through the Strait of Hormuz comes out here to Asia. So intuitively, if the war lasts, emerging markets, because they are primarily Asian, should underperform.”

Looking ahead to the upcoming Federal Reserve meeting, Matthews anticipates measured action. “It is premature for the Fed to react to this war in Iran, but the non-farm payroll reading for February was a loss. That would suggest they would be in favor of cutting interest rates. The market is looking for two rate cuts this year. One reason is because the Federal Reserve does not like to surprise the market. It likes the market to price in broadly what it is thinking. I do not expect one of those to necessarily be next week, but by the end of this year, there should be two.”

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Regarding hedging strategies for India, Matthews points to the oil sector rather than precious metals alone. “Gold and silver have done very well, but they are vulnerable because in risk-off events of this size, people like to take profit. With oil over $100 and war not ending soon, there is a case for owning the oil sector, not just in India but globally. Longer term, even when this war ends, if Iran is not stable, the Strait of Hormuz will not be stable either, and that is responsible for about 20% of the world’s oil trade.”
He also highlighted potential central bank responses, saying, “Iran’s game plan is quite obvious. They want to get oil prices as high as possible to put pressure on the US. With high oil prices, we will see inflation, because oil feeds into many aspects of the consumer and producer price indices. Supply chain disruptions, like issues in the Suez Canal, are also inflationary. When you have inflation, it is hard to cut interest rates, and central banks might even have to raise them depending on how long the war lasts.”Finally, Matthews weighed in on China’s position in the current geopolitical landscape. “China has been very prudent in accumulating a large oil reserve—over 250 days’ worth. That is a good thing. But China is the largest buyer of Middle Eastern oil. Longer term, this could incentivize them to diversify, with Russia being an obvious option. Very few are winning in this scenario, but Russia, Norway, Kazakhstan, and Venezuela are among those benefiting.”

As global markets grapple with high oil prices, geopolitical tensions, and inflationary pressures, investors are navigating an uncertain landscape. While India’s underperformance relative to other emerging markets might cushion its downside, exposure to energy-related sectors could offer a strategic hedge in these turbulent times.

“So, yes, from the morning lows we are seeing some bounce back and this has been the pattern since last week where a huge gap down is followed by intraday bounce. But overall, the trend remains negative and gradually the market is moving lower. And we expect this volatility to continue and hence one should avoid complacent bets,” said Rajesh Bhosale, market strategist from Angel One.

He added, “On the higher side, if we see 24,200 to 24,300, that was a major support zone and that has been breached, so we expect further lower levels in the near term. So, avoid aggressive longs as of now. On the downside, if we see, 23,500 is the next key support, that is a key golden retracement. Last year there was a rally from the levels of around 21,700, and the golden retracement for that comes around 23,500. So, the next key level would be around 23,500. But as of now, until we see a clear reversal, one should avoid aggressive positions.”

Bhosale also shared stock-specific insights amid the volatile market. “If we see, there is volatility and we are seeing opportunities on both sides. Auto space is under tremendous pressure, and from that space, TVS Motor has seen a fresh breakdown. On the daily chart, there is an ascending triangle breakdown, and after a long time, it is slipping below 89 EMA. So, we expect the weakness can extend in the near term. One can have a bearish bet on TVS Motor considering 3,730 as a key resistance point and keeping that as a stop loss. We expect TVS Motor can slip towards the levels of 3,430.”

He highlighted potential opportunities in other sectors as well. “Some relative strength is visible in some counters. Banking space is under pressure, but IT space is somewhat showing relative strength. From that space, we are liking LTIMindtree. Last year, the stock was trading around 4,200 in March and rallied towards 6,000. LTIMindtree is again around the same levels this March. We expect a bounce back since indicators are oversold. With a stop loss of around 4,180, we are expecting a move towards 4,700 levels.”

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Regarding PSU banks, Bhosale suggested a cautious approach. “We are seeing fresh breakdown in the PSU banks. On the daily chart of the PSU bank index, we can see a bearish island reversal formation. We expect the PSU bank index can extend its move towards 8,300. As of now, we will have a wait and watch approach. When it comes to 8,300, we will try to pick some good counters such as Bank of Baroda, Canara Bank, and Union Bank. But for now, we suggest avoiding positions as further weakness is expected in the near term.”
Analysts advise investors to maintain caution and avoid aggressive positions while keeping an eye on key support levels as the market navigates through heightened volatility.

“When these kinds of crises come and go, the good news is that this time around, the Indian economy and micro fundamentals are much stronger than in past crises. That at least gives you added comfort,” Khemani said. “But definitely, like I always say, good price and good news do not come together. So, whenever there is good price, it is accompanied by some bad news, which is what it is today. Also, one needs to see that the long-term terminal value of equities does not get changed because of short-term movements, and that largely determines equity valuation. Hence, any such aberrations are generally, unless they are expected to put a permanent dent on any business, an opportunity to buy.”

When asked where investors might find attractive buying opportunities, Khemani highlighted sectors closely aligned with the domestic economy. “Look at banks, which are completely aligned to the domestic economy. We have seen good corrections because of this event. I know that temporarily, there could be some impact on one quarter’s profitability, but they do not change anything on the business. Consumer sectors and consumer sentiment can also change in the short term, with some dents in margins here and there, but structurally it does not change anything. Even the pharmaceutical sector, which is quite defensive in these times, ends up seeing flows coming through. So, usual domestic economy-aligned sectors where you are seeing large corrections due to this situation are opportunities to buy.”

On the divergence seen within the banking segment, with some large private banks under pressure while public sector banks (PSBs) offer valuation comfort, Khemani said: “We actually like both PSU and we recently owned some PSU banks as well. Historically, we have always been bullish on private banks, but in the last couple of years we have been more positive on PSU banks as well because there is clear value, and they have been delivering good growth in the last three-four quarters. So, we continue to remain balanced in both segments.”

As markets continue to digest global and domestic uncertainties, Khemani’s advice underscores a long-term perspective: short-term volatility can present buying opportunities in fundamentally strong sectors.

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