“This is one thing which we could have definitely done without,” Prasad said plainly. “Given the fact that the Indian market was anyway trading at high valuations to start with — and you had a lot of concerns emerging around the longevity of business models of IT companies — this only adds to the headwinds.”
The oil and supply risk
Prasad was quick to distinguish between price risk and supply risk. While rising crude prices are widely tracked, he flagged the potential disruption to physical supply as the more serious threat. India sources roughly half its crude imports and a significant share of its LNG through the Strait of Hormuz. Refiners may hold around two months of finished product inventory, but gas storage is far more limited — with Qatar being the dominant supplier through that corridor.
ETMarkets.com“”Every dollar per barrel change is about roughly $2 billion as far as current account deficit is concerned. You are now looking at $10–20 a barrel higher — the magnitude is reasonably large.””
The government’s historical policy of imposing a windfall tax on upstream producers like ONGC above $75 per barrel means there is limited earnings upside even for oil producers, while downstream marketing companies face sharply compressed margins. Cement, paints, and other commodity-linked sectors could also see margin pressure if elevated prices persist.
Earnings upgrades delayed, not derailed, for now
Before the conflict, several positive signals had been building: credit growth rebounding to 15%, GST rate cuts driving volumes in auto and consumer discretionary, and a commodity-led tailwind for metals and mining. Prasad said those trends remain intact in principle, but the new geopolitical variable is “mostly negative” for the earnings outlook. His base case is that if tensions are resolved within a few weeks, significant earnings downgrades can be avoided. A prolonged conflict, however, would force a more serious reassessment.
AI: The longer-term overhang on IT
Separately, Prasad expressed caution on Indian IT services, having recently hosted nearly 19 companies for investor meetings. He acknowledged clear productivity gains from AI tools but said the deeper question — whether clients will compensate for lower per-project costs by awarding more projects — remains unanswerable. “It is going to be deflationary as far as the cost of programming is concerned,” he said. “How much of that is offset by more work from the same client, we will have to wait and see.”
The market has already responded by compressing multiples for IT services companies, reflecting not just near-term earnings uncertainty but growing doubts about medium-term growth trajectories. Prasad suggested this repricing is rational given the level of structural uncertainty involved — and warned that analysts across sectors may still not be adequately pricing in the combination of geopolitical risk and technology-driven disruption.His overall message: reset expectations, work with wider risk bands, and wait for clarity on duration before making major portfolio moves. “All you can hope for is that this blows over in the next few weeks,” he said, “and life can go back to whatever the new normal is.”