Nifty took investors on a wild ride this week as it climbed steadily throughout the week but surrendered most of its gains on April 12 due to concerns about rising US inflation, delay in interest rate cuts, and heightened geopolitical tensions. The coming week will be crucial for the market as fresh worries regarding the Israel-Iran conflict emerge.
Iran launched its first direct attack on Israel with explosive drones and missiles on April 13, raising a threat to security and peace in the Gulf region. Israeli Prime Minister Benjamin Netanyahu has said that Israel has been preparing for a direct attack by Iran.
The event also garnered attention from leaders around the globe. Any significant escalation in tensions may incite panic selling and heighten volatility in global stock markets, said analysts.
Also Read | Israel-Iran tensions: How should investors navigate the impact on financial market?
In the upcoming holiday-truncated week, investors will be watching for developments in the Middle East. Here are some stocks that will remain in focus due to escalating tensions between Israel and Iran.
1. Adani Ports: Adani Ports owns the Haifa port in northern Israel. It completed the purchase in January 2024 for about US$ 1.03 billion and operates the port with a local partner. Although the war has not yet impacted the port in any way, a broader escalation in the conflict could make critical infrastructure within Israel, such as this port, a potential target.
2. Sun Pharma: Sun Pharma’s subsidiary, Taro, is an Israeli firm. If some of the staff is potentially called for active duty in the war, it could impact production to an extent but it is unlikely to have a big impact on Sun Parma’s overall consolidated financials.
3. OMC stocks: If the Iran-Israel conflict deepens, it is expected to drive crude prices higher to potentially hitting $100 per barrel in the near future. This may directly hit the stock of Oil Market Companies (OMCs) such as Hindustan Petroleum Corporation (HPCL), Indian Oil Corporation (IOCL) and Bharat Petroleum Corporation (BPCL).
These scrips may see increased volatility as higher crude prices not only put pressure on marketing margins but also lead to a rise in working capital requirements since OMCs import crude oil to meet the country's petroleum products demand. As crude prices rise, they need to spend more on imports.
4. Paint Stocks: Whenever crude oil prices go up, the paint sector is hit hard as the main inputs in the manufacture of paints are crude oil derivatives. These companies have no control over these input prices.
If tensions in the Middle East escalate pushing crude price to above $100 per barrel, stocks of paint manufacturers like Akzo Nobel India, Berger Paints, Indigo Paints, and Shalimar Paints may come under pressure as crude derivatives account for almost 40 percent of the input bill for these paint manufacturers. A rise in the price of crude can mean narrower profit margins.
Also Read | Israel-Iran escalating tension to trigger correction in equities? Check Nifty, Bank Nifty levels to watch
5. Tyre stocks: Since the tyre industry uses crude oil derivatives for manufacturing synthetic rubber, several tyre stocks including MRF, CEAT, Apollo Tyres, JK Tyres, and Goodyear Tire & Rubber India will remain in focus as a rise in crude price will hit their margins.
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