And just like that, the House of Cards came crashing down on October 3 as benchmark indices plunged deep into the red, rattled by Iran’s launch of ballistic missiles at Israel, sparking fears of retaliation and escalation in the war. But is this another false fall, destined to be propped up by the familiar 'buy on dips'?
The geopolitical tinderbox is now the biggest threat to global equities, warns Jefferies' Chris Wood, who says markets haven’t even begun to grasp the full danger yet. Wood warns that if the crisis in West Asia escalates—or if the Russia-Ukraine conflict intensifies—global markets, including India, could be hit hard, which they are not yet prepared for.
The real nightmare scenario? Israel targeting any oil installations in Iran, which could send crude prices soaring and wreak havoc on oil-importing nations like India, driving the trade deficit through the roof.
An earlier ICICI Bank research backs this up. If crude prices hover in the $80-90/barrel range, India’s trade deficit could hit $266 billion for FY25. But if oil jumps by another $10 per barrel, the deficit could balloon to $276 billion, with the current account deficit widening by a similar amount.
But it might not be all gloom and doom as analysts believe that the hallmark of a bull market is its ability to climb all walls of worries, which Indian markets have done so far. In fact, India's current bull market is only past the halfway mark, according to Morgan Stanley's Ridham Desai who strongly believes that corrections may rattle the market but could also lure sidelined investors into the game.
As the storm clouds gather, analysts are urging investors to stay sharp. A tactical pivot to defensive stocks like Pharma and FMCG might be wise. Meanwhile, foreign investors are shifting funds to China, drawn by cheaper valuations in Hong Kong, which could keep up the pressure on Indian markets. The stakes have risen dramatically, and the writing is on the wall: it's time to buckle up and stay vigilant, as the storm has just begun.
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Dabur India (Rs 583.65, -5.7%)
Reported Q2 business update, with consumption off-take falling as a result of adverse weather impact.
Bull Case: The demand setting is expected to improve from rural recovery, which makes up 45% of revenue and better winter demand to aid mix. The company is confident on growth revival from Q3.
Bear Case: Consolidated revenue is likely to decline ~5% YoY due to pipeline correction in GT, impact of heavy rains and subdued urban demand. EBITDA is likely to clock ~15% YoY decline due to low primary sales and operating deleverage, noted Nuvama. Dabur has relatively underperformed peers, and brokerages expect this to continue in the near term.
Petronet LNG (Rs 364, +5.8%)
Shares gained after Emkay Global raised its recommendation to 'Buy' from 'Add' and raised target price to Rs 425. The upgrade came after Peronet said that it had commissioned two new LNG storage tanks.
Bull Case: Dahej terminal is expected to achieve approximately 100 percent utilisation for the rest of the fiscal year. The commencement and ramp-up of Exxon's second 1.2 mmtpa term contract, along with the higher Kochi tariff in FY26-27, is expected to increase EPS by 7-9 percent. Valuations remain attractive.
Bear Case: Tariff outlook after the QatarGas renewal in CY28 has raised concerns, as off-takers are seeking downward adjustments.
Crompton Greaves (Rs 427, -1%)
Shares fell despite despite outperform call from CLSA.
Bull case: The company’s transition to premiumization and focus on a differentiated go-to market strategy bode well for the company.
Bear Case: The company faces a demand problem in the near term. While this is expected to be temporary, it could pose a challenge if the demand concerns linger on for longer.
(Inputs from Zoya, Neeshita, Veer)
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