Market Recovery Ahead: Analysts Identify Undervalued Stocks for Potential Rebound

Indian Stock Market Sees Sharp Rebound Amid US-Iran War De-escalation

The BSE Sensex and Nifty 50 indices surged by over 2% each on Tuesday, following a relief rally in global markets amid signs of de-escalation in the US-Iran war.

The gains in the Indian stock market were supported by the remarks from US President Donald Trump hinting at a temporary de-escalation in the war after he extended his deadline for Iran to reopen the Strait of Hormuz. The US will also hold off striking Iranian power plants for five more days.

Key Sectors to Benefit

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• Oil marketing companies (OMCs) are expected to bounce back, with valuations currently trading below long-term averages on a price-to-book value (PBV) basis.
• Private banks, such as HDFC Bank, are seen as attractive opportunities, with the stock trading at around 1.5x PBV and having overreacted to the chairman's resignation.
• NBFCs, such as Bajaj Finance and Shriram Finance, are expected to see minimal earnings disruption, with their share prices having fallen by 16% and 19% respectively.
• Autos, such as Ashok Leyland, are likely to benefit from a correction in diesel prices.

Market Recovery Expected

Analysts at Emkay Global Financial Services Ltd expect the market to aggressively price in the probability of peace, with the Nifty 50 expected to rebound after a 5% collapse in the last three trading sessions. The brokerage maintains its December 2026 target of 29,000 for the Nifty 50, based on a +1sd PER of 20x.

Impact on Q4 Results

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Emkay Global expects some impact on Q4FY26 earnings, with a spillover to Q1FY27. Supply chains are likely to take 1-2 months to normalize after the Strait of Hormuz reopens.

Key Figures

• Nifty 50: up 2% on Tuesday
• BSE Sensex: up 2% on Tuesday
• Brent crude oil prices: expected to retrace to $75-80 per barrel from near $103 now
• Rupee: expected to bounce back to pre-war levels of ₹91 per USD
• 10-year bond yields: expected to drop to ~6.65% from 6.83% currently