Nifty May Plummet to 21,000 if Crude Prices Remain Above $100 Amid US-Iran Tensions; Analysts Recommend Buying These Shares

Market Update: NSE Nifty at Risk of Further Decline

The NSE Nifty may decline to around 21,000, implying a further ~10 percent downside from the current level, if crude oil prices remain above $100 per barrel for the next 3-4 months due to the ongoing US-Iran conflict.

The current market correction may not yet be over, according to Emkay Global. However, the potential crash is seen as temporary, providing an opportunity to invest in select beaten-down stocks for long-term gains. The NSE Nifty has already seen a sharp decline in recent weeks, falling 9.2 percent over 10 sessions between February 26 and March 13, slipping from near 25,500 to 23,150.

The ongoing geopolitical escalation, particularly the disruption of crude and gas supplies through the Strait of Hormuz, could keep oil prices elevated for longer, amplifying risks to India's macro stability and corporate earnings. Emkay noted that crude sustaining above $100 per barrel for a few months is "worryingly probable," and such a scenario is not fully reflected in current valuations.

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Higher oil prices would transmit quickly into the economy through multiple channels, with potential impacts including a widening of India's current account deficit by 9-10 basis points of GDP, a rise in inflation by around 50 basis points, and pressure on oil marketing companies' profit margins.

At the earnings level, Emkay expects a downgrade of about 1.7 percent to Nifty EPS from the direct impact, with an additional 1-2 percent downside risk from second-order effects such as demand destruction and higher input costs.

The brokerage warned that a prolonged conflict could trigger broader financial market stress, including capital outflows, liquidity tightening, and currency weakness, potentially pushing the rupee towards 95 per dollar while lifting bond yields and credit spreads.

Sectorally, the impact is expected to be uneven but widespread, with oil marketing companies, utilities, airlines, and auto companies being more vulnerable to both demand slowdown and margin pressures. However, sectors such as IT, pharma, metals, and power could be relatively better insulated.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Despite the near-term risks, the correction would likely be temporary, said Emkay. The brokerage expects that once crude prices normalise towards $70 per barrel, India's growth and earnings trajectory could recover, making the current phase a potential long-term entry opportunity.

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