The base case is back
Shah was unambiguous: the ceasefire snaps the market back to its pre-conflict playbook. That means lower crude oil prices, better GDP growth, easing inflation, and critically, no need for the Reserve Bank of India to hike rates. “We had not cut our price target for Nifty as a year end,” Shah told ET Now. “We are continuing to call it at about 26,200, which from current levels is still about 13 odd percent upside.”
Historically, he noted, equity valuations during active conflict tend to trade between long-term averages and one standard deviation below. Once conflict ends, markets have consistently re-rated to above long-term average — between the mean and one standard deviation above. That re-rating trade is now live.
Crude is the hinge variable — and it just moved in India’s favour
BofA is currently modelling crude at $92.5 per barrel as a full-calendar-year average. With three months already behind us and prices pulling back sharply overnight, Shah believes the trajectory points lower. The significance goes beyond fuel costs. Crude dragged aluminium and other commodities higher during the conflict due to Middle East supply disruptions. A sustained ceasefire unwinds that commodity spike across the board.
The earnings impact, however, will not disappear overnight. Shah cautioned that March quarter and June quarter corporate results will still carry the bruises — companies either passed commodity cost pressures onto consumers or absorbed them into margins. The cleaner earnings picture, he believes, begins in the second half of this calendar year.
Rate-sensitives are back on the table
BofA had downgraded interest rate-sensitive sectors on the assumption that commodity-driven inflation would force the RBI’s hand. That thesis has now been shelved. With inflation pressures easing alongside crude, Shah says NBFCs, passenger vehicles, and real estate — all sectors that suffer when rates rise — can be looked at favourably again.
Mass consumption will disappoint. Premium discretionary will not
Shah drew a sharp distinction within the consumption universe that investors should not miss. Well-off Indian consumers — driving demand for automobiles, consumer durables, jewellery, and travel — remain a structural buy. That story has not changed.Mass consumption is a different matter entirely. Shah’s analysis shows that roughly 76% of Indian consumers built up significant leverage in the five to six years following Covid. The government has responded with tax cuts, rate cuts, and subsidies totalling approximately $74 billion. The problem: the leverage overhang sits at around $158 billion. The math simply does not work yet. Another year of government support — another $74 billion — is needed before that leverage rolls off meaningfully. Until then, staples, retailers, footwear, and apparel are expected to underperform through this calendar year.
Three sectors that win regardless of geopolitics
Perhaps the most actionable part of Shah’s framework is a cluster of sectors he argues are structurally insulated from the conflict narrative entirely.
Power and energy infrastructure tops the list. India’s capacity addition cycle for data centres and domestic power demand was already accelerating. The conflict, Shah argues, only hardens government resolve to double down on energy security capex — making transformers, cables, power generators, and transmission companies compelling regardless of how the geopolitical situation evolves.
Pharmaceuticals and hospitals come next. The sector is demand-inelastic, heavily export-oriented toward the US and Europe, and is now a direct beneficiary of rupee depreciation caused by the conflict.
Telecom rounds out the trio as a domestic, non-cyclical compounder
Finally, Shah pointed to financials as a value sector that was cheap before the conflict and has only gotten cheaper during it — making current valuations an opportunity rather than a warning sign.
The message from BofA is clear: the conflict premium is coming out of the market. Position accordingly.