Oil Supply Blockade Risks Earnings Hit for Indian Companies: Anil Ghelani of DSP Weighs in

Market Insight: Impact of Iran War on Q1 2026 Earnings

DSP Investment Managers' Head of Passive Investments and Products, Anil Ghelani, expects the Iran war to have a relatively low impact on Q1 2026 earnings due to the conflict escalating towards the end of the quarter. However, if the situation continues, there could be a major negative impact on the economy.

Key Drivers of Economic Growth

The Indian economy is driven by domestic consumption-led growth and government capex spending. While geopolitical escalations and supply chain disruptions pose challenges, they may not structurally alter these growth drivers. As a result, corporate balance sheets and macroeconomic fundamentals are expected to remain strong.

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Market Sentiment and Interest Rate Cuts

Market sentiment suggests that investors are assuming a quick resolution to the conflict, leading to a positive move in equity markets once the immediate conflict cools down. However, this is unlikely to be a sharp rally. The RBI may delay interest rate cuts due to the risk of swiftly rising inflation.

Portfolio Recalibration

While corrections can be a good opportunity to review investment portfolios, it is not a reason to make structural changes. Instead, investors should use this time to review their portfolios with their trusted financial advisor and ensure alignment with their financial plans.

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Sectoral Focus

When evaluating sectors, it is essential to consider the CoFE framework: Corporate Earnings, Flows, and Event Risks. Currently, many sectors appear expensive when looking at valuations relative to corporate earnings. Investors should remain cautious on sectors with high exposure to global commodity volatility and focus on sectors like private banks, large-cap IT, and healthcare once event risks reduce.

Oil Price Outlook

The current oil price rise is primarily due to supply chain issues rather than a supply issue. With a comfortable supply of oil and reasonably large inventories, it is possible that oil prices could stabilize below $100 a barrel soon.