India is among the world’s largest energy importers, with crude imports meeting nearly 85% of domestic demand. When oil prices rise sharply, the effects ripple through the economy. Higher import costs can widen the current account deficit, increase imported inflation and complicate fiscal management if fuel subsidies rise.
Currency dynamics also become critical, as elevated oil prices often weaken the rupee and reduce dollar returns for foreign investors.
Despite these risks, analysts say the broader structural outlook for Indian equities remains intact. Corporate balance sheets are healthier than in previous cycles, the private capital expenditure cycle is gradually reviving and domestic demand continues to support earnings growth.
In this environment, market experts say investors should focus on sectors that are either insulated from geopolitical shocks or that could benefit directly from them. Analysts are highlighting nearly 40 stocks across sectors such as defence, pharmaceuticals, banking, infrastructure and FMCG that could help investors cushion portfolios against volatility.
Defensive sectors gain focus
Defensive sectors such as pharmaceuticals and healthcare are often among the first destinations for investors during periods of geopolitical stress. Khushi Mistry, research analyst at Bonanza, said healthcare demand remains largely non-cyclical even during economic disruptions.
“Pharmaceuticals tend to remain resilient because healthcare demand is essential. Consumption of medicines and healthcare products does not decline significantly even during geopolitical disruptions,” she said.
Paresh Bhagat, chief investment officer at Veer Growth Fund, also pointed to the defensive nature of Indian pharma companies. “In the context of the US-Iran conflict, India pharma stands out as a relatively defensive pocket. Demand in chronic therapies such as cardiac and diabetes remains steady, and a weaker rupee during geopolitical stress can support export-driven companies by boosting rupee revenues,” he said.
In the current context, Nomura has recommended several healthcare and pharma stocks, including Sun Pharma, Cipla, Lupin, Zydus and Fortis Healthcare, as relatively resilient plays during volatile market conditions.
Bajaj Broking’s healthcare picks include Apollo Hospitals, Rainbow Children and Narayana Hrudayalaya, which they believe have strong growth visibility over the next few years.
Defence stocks gain strategic relevance
Defence stocks are another sector drawing attention amid rising geopolitical tensions, as governments typically increase defence spending during periods of conflict.
Khushi Mistry said rising security concerns often accelerate defence procurement programmes and strengthen order pipelines for defence manufacturers.
HDFC Securities has highlighted defence companies such as Apollo Micro Systems, Data Patterns, Astra Microwave and Bharat Electronics as potential beneficiaries of increased defence spending.
Infrastructure and capital goods remain structural bets
Infrastructure and engineering companies with strong order books are also seen as long-term beneficiaries of India’s investment cycle. Dr Vikas Gupta, CEO and chief investment strategist at OmniScience Capital, said sectors such as infrastructure, power and strategic resource companies tend to outperform during periods of geopolitical uncertainty.
“Oil and gas exploration companies, defence, infrastructure, power and banking should do better than the rest of the market. Companies exposed to rising input costs from commodities may face margin pressures, but sectors linked to strategic resources and infrastructure can remain resilient,” Gupta said.
Among Bajaj Broking’s preferred infra and construction plays are Larsen & Toubro, KEC International and VA Tech Wabag.
Banks remain a core portfolio anchor
Large banks continue to feature prominently in brokerage recommendations, with analysts citing strong balance sheets and improving credit growth. BNP Paribas prefers HDFC Bank, ICICI Bank and Axis Bank, while Systematix has highlighted SBI, Bank of Baroda, Bank of India and Federal Bank.
FMCG offers earnings visibility
Fast-moving consumer goods companies are also viewed as relatively defensive because demand for essential products tends to remain stable even during economic uncertainty.
Ravi Singh, chief research officer at Master Capital Services, said defensive sectors such as FMCG often attract investors during risk-off phases because their earnings remain relatively predictable.
Among Axis Securities’ recommendations in the consumer space are Varun Beverages, Tata Consumer Products and ITC, along with Nestle India, Britannia Industries and DOMS Industries.
Oil and energy companies may benefit from crude rally
Rising crude prices could also benefit energy companies involved in exploration and production. Nomura has maintained a positive view on Reliance Industries, which it expects to benefit from higher refining margins and inventory gains during periods of rising oil prices.
A broad list of defensive and growth picks
Bajaj Broking’s stock picks span multiple sectors including healthcare, pharmaceuticals, infrastructure, banking, consumer goods and defence.
The list includes Apollo Hospitals, Rainbow Children’s Medicare, Narayana Hrudayalaya, Concord Biotech, Torrent Pharma, Sun Pharma, Divi’s Laboratories, Larsen & Toubro, KEC International, VA Tech Wabag, State Bank of India, ICICI Bank, HDFC Bank, Varun Beverages, Tata Consumer Products, ITC, Hindustan Aeronautics and Bharat Dynamics.
Combined with additional picks from other brokerages across pharma, defence, banking, energy and FMCG, analysts say investors have a broad set of nearly 40 stocks that could provide relative stability during a volatile market phase.
Volatility likely to persist
Analysts caution that geopolitical tensions could continue to drive volatility in the near term. Elevated crude prices, currency fluctuations and foreign investor outflows remain key risks for emerging markets. Bajaj Broking said this is not a call for widespread liquidation, but a signal to prudently reassess portfolio positioning, prioritise downside protection and remain flexible to act on opportunities as they arise.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)