Heightened volatility and mounting headwinds have prompted global and domestic brokerages to take a more cautious stance on Indian equities, as the escalating West Asia conflict fuels crude oil volatility, inflation risks and clouds the outlook for growth and corporate earnings.
While most firms believe the domestic structural story remains intact, near-term market direction is seen hinging on the duration of geopolitical tensions, trajectory of oil prices and foreign capital flows, prompting several brokerages to pare index targets and reassess risk-reward.
‘GFC-like risks’
Bernstein said the ongoing geopolitical shock could expose India’s macro vulnerabilities if elevated crude prices persist, drawing parallels with stress periods seen during past global crises. It warned that a prolonged conflict could recreate conditions similar to the aftermath of the global financial crisis, when India’s growth slowed sharply, inflation surged and the rupee depreciated steeply.
Early warning signs are already visible, with the rupee weakening about 11 per cent over the past 18 months and elevated crude prices threatening to push inflation beyond the Central bank’s tolerance band for the first time since late 2024. A delay in rate cuts, weaker remittances from Gulf nations and continued foreign investor outflows could strain the balance of payments and shave 3-4 per cent off GDP growth, a level that would effectively resemble a recession for an emerging economy like India.
Factoring in these risks, the brokerage cut its year-end Nifty 50 target to 26,000, implying limited upside from current levels, and maintained a neutral stance on equities.
Both the Nifty 50 and the BSE Sensex have declined 10.5 per cent each since February 27, reflecting sustained selling pressure amid escalating geopolitical tensions and volatile global risk sentiment.
UBS downgrade
UBS also downgraded Indian equities to neutral from attractive, citing rising macro vulnerability to energy supply disruptions and persistent price pressures. The brokerage said India’s heavy dependence on imported oil, LNG and LPG leaves the economy exposed to geopolitical chokepoints, particularly the Strait of Hormuz, where any disruption could sharply strain external balances and corporate earnings.
Citi, Nomura trim Nifty targets
Adding to the cautious sentiment, Citi recently cut its year-end target for the Nifty 50 to 27,000 from 28,500, flagging rising risks to economic growth and corporate earnings as surging oil prices and supply disruptions cloud the outlook. In a similar move, Nomura slashed its December 2026 Nifty target by 15 per cent, bringing it down to 24,900 from 29,300.
BNP Paribas had warned that key macro indicators such as the balance of payments, fiscal position, inflation and corporate earnings remain vulnerable to prolonged geopolitical stress.
In contrast, domestic brokerage Emkay Global staged a bullish perspective, maintaining its December 2026 Nifty target of 29,000 as it anticipates a sharp “peace dividend” bounce following any de-escalatory news.
Emkay remains bullish
Emkay Global expects India to be a major beneficiary of easing oil prices due to its heavy reliance on imported crude and projects Brent Crude to retreat to $75-80 per barrel.
The brokerage added that domestic markets are poised for a smart recovery after recent foreign investor selling dragged the Nifty 50 lower, with easing crude prices and more reasonable valuations likely to attract flows back into equities. It expects the rupee and bond markets to strengthen alongside equities as investors quickly price in the peace dividend, even though real economic normalisation could take a few months.
Emkay Global cautioned that some supply-chain disruptions and energy infrastructure damage may weigh on near-term earnings, estimating a modest impact on FY27 profits, with small- and mid-cap firms facing slightly higher but temporary pressure.
Published on March 25, 2026
