US-Iran Peace Pact Could Have Positive Impact on Markets: CIO Alok Singh's Outlook

Market Outlook Uncertain Despite Earnings Recovery Potential

A peace deal between the US and Iran may trigger a constructive market response, but a sharp, runaway rally appears unlikely at this stage, according to Alok Singh, the Chief Investment Officer at Bank of India Mutual Fund.

The outlook for earnings recovery appears encouraging, with quarterly results declared in Q4FY26 indicating positive momentum. However, the impact of the West Asian conflict may be reflected in Q1 FY27 and potentially partially in Q2 FY27, leading to a more stable trajectory in the second half of the fiscal year.

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Despite the potential for a peace deal, the behavior and commitments of the involved parties will remain under scrutiny, leaving some doubts about the sustainability of such an agreement. A peace deal would be viewed as a positive development, but it may not be enough to trigger a sharp, runaway rally.

The outlook for earnings recovery is expected to remain encouraging, with the second half of the current fiscal year expected to show a more stable trajectory. This is due to the positive momentum seen in quarterly results declared so far, which indicate a positive momentum.

The return of Foreign Institutional Investors (FIIs) to the Indian equities market will depend more on relative global trade dynamics, interest rates, and risk-reward attractiveness across markets. A US-Iran peace deal could improve the broader macroeconomic environment, but it may not be enough to trigger a sustained return of FII inflows.

Bank of India Mutual Fund maintains a selective approach toward new-age businesses, considering factors such as business sustainability, valuation levels, and the visibility of cash flows. Companies that demonstrate strong fundamentals and a clear path to profitability are more likely to remain attractive.

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Metal prices globally are influenced not only by demand-supply dynamics but also by currency movements, particularly currency debasement. Recently, currency factors have played a significant role in supporting metal prices. As long as currency debasement risks persist, metals may continue to outperform on a relative basis.

The IT sector has undergone a meaningful valuation correction, making it appear attractive from a historical perspective. However, any meaningful re-rating is unlikely until there is greater clarity on the long-term impact of AI on business models. Until then, valuation-driven optimism may remain short-lived.