“Is this the end of the conflict? Probably not. Is this the end of the crazy period of escalations? We think yes,” Venugopal Garre, Bernstein’s India strategist, said in a strategy report. “With both US and Iran suffering heavy losses, the former more in economic terms and the latter through devastation, we think this is a phase the leadership of both countries will look to find an off-ramp from this situation while portraying victories to the domestic crowd.”
Garre highlighted that US gasoline prices have exceeded $4 a gallon, domestic support for President Trump’s actions in Iran is very limited, and NATO allies have subtly signalled their unwillingness to support the US in the Middle East, creating space for broader negotiations where both nations can have meaningful gains.
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Bernstein recommends investing in the rebound through financials as a more durable play, with short-term risk exposures to the most impacted sectors, including MENA-exposed construction. The brokerage expects oil marketing companies, travel, chemicals, paints, and construction to see a rebound lasting a few days.
“We believe the end to hostilities will mark a gradual reversal in many areas, some of which are heavily beaten down by FII exits like financials, which remains a longer-term play,” Garre wrote. “A short-term reprieve should be evident across all sectors that are specifically vulnerable to crude: chemicals, aviation, logistics, paints and pharma, energy (OMCs) to an extent.”
However, Bernstein cautioned that it still doesn’t see a significant reason for FIIs to come back in droves or crude to improve materially below $85-90. “Nevertheless, the end of escalatory phases is a positive that should negate further deterioration,” Garre added.
The ceasefire also gives the government room to tackle internal economic challenges from a potentially bad monsoon (Super El Niño) and the crude impact that has already damaged the fiscal position, according to the note.
Bernstein’s strategy continues to identify stocks that are inexpensive relative to growth across sectors, with financials positioned as the longer-term play and crude-sensitive sectors offering short-term rebound opportunities. The brokerage sees particular value in oil marketing companies, travel, chemicals, paints, and construction over the coming days, while MENA-exposed construction stocks present calculated risk exposures for investors willing to participate in the most impacted sectors.
On India’s strategic positioning, Bernstein noted the episode exposed the country’s vulnerability to external shocks. “The reality is that India must diversify its energy mix away from crude oil and natural gas and move toward a more focused electrification of the economy,” Garre wrote. “The push for electric vehicles should now be accelerated, even though supply chain risks persist, with greater emphasis on securing critical minerals and expanding electricity generation capacity, including from coal if necessary.”
India’s limited involvement in war-related negotiations indicates that geopolitical neutrality will continue as a core policy stance, Bernstein said. “As a result, India is unlikely to gain significant advantages in future policy discussions with the United States but will also be less likely to face punitive outcomes. In essence, the end of the war leaves India geopolitically neutral, without emerging as a clear beneficiary.”
Bernstein remains neutral on Nifty despite the 12% upside target, acknowledging that while bottom-up analysis shows only moderate correction with some stocks appearing inexpensive and others moving into lower priced-in growth territory, the broader market still appears expensive with a fall in Nifty’s implied growth.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)