Market Strategists Weigh Risks and Opportunities Amid Rising US-Iran Tensions: Sectoral Outlook

Indian Markets Under Pressure Amid US-Iran Conflict

The Indian markets have been under sustained pressure since the start of the US-Iran war in late February, with investors grappling with rising crude oil prices, a depreciating rupee, and persistent foreign fund outflows. The Nifty 50 has declined around 6-7% during this period, while Brent crude has surged more than 52% to around $110 per barrel as of Tuesday, 19 May. At the same time, the rupee has weakened nearly 6% against the US dollar, reflecting mounting stress on India’s external position.

The ongoing uncertainty over the conflict and the Strait of Hormuz continues to keep energy markets anxious, despite a slight fall in oil prices after US President Donald Trump announced he had cancelled a planned strike on Iran at the request of Gulf allies. The pressure on the rupee has increased due to high crude imports, lacklustre capital inflows, and persistent selling by foreign portfolio investors (FPIs) of over $20 billion in Indian equities.

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India’s merchandise trade deficit widened to $28.38 billion in April, driven by rising oil imports, heightening concerns about the current account deficit. With inflation risks, currency weakness, and growth concerns persisting, investors are increasingly seeking the right trading strategy and sectors that can weather prolonged geopolitical and macroeconomic volatility.

According to Sunny Agrawal, Head of Fundamental Research at SBI Securities, the potential US–Iran ceasefire should be viewed as a “lower crude, macro-positive” development for India, given the country’s heavy dependence on oil imports. A sustained correction in crude oil prices could improve India’s current account balance, ease inflationary pressures, and support rupee stability, creating a favourable environment for equities.

In such a scenario, Agrawal expects investors to rotate away from upstream oil and gas stocks and defensive plays toward domestic cyclicals and rate-sensitive sectors. Financials, autos, and consumption stocks, including airlines and paints, as well as capital goods, could benefit from lower input costs, margin expansion, and improving demand momentum.

Meanwhile, Antu Eapen Thomas, Senior Research Analyst at Geojit Investments, said investor sentiment remains cautious amid the prolonged Gulf conflict, with elevated bond yields, high crude prices, and a weakening rupee continuing to stoke inflation concerns. Thomas recommends a staggered investment approach, with a preference tilted towards large-cap stocks for stability, while exposure to mid-caps should remain stock-specific, driven by earnings visibility and fundamentals.

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According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, the Nifty 50 is currently witnessing a consolidation phase on the daily charts, with the index repeatedly defending the crucial 23,300 zone over the past week. This level coincides with the 50% retracement of the rally from the April low of 22,180 to the recent high of 24,600.

Bhosale suggests that traders should closely monitor the 23,300-23,100 support band and the 23,850-23,900 resistance zone, as the next meaningful directional move is likely only after a breakout from this range. A decisive breakout above 23,900 could trigger fresh bullish momentum, potentially pushing the Nifty towards the 50 DEMA at 24,150 and beyond.