The negative news cycle of the past few weeks with respect to the war and consequent supply disruptions appears to have hypnotized market participants into extrapolating the current negative environment in perpetuity or for a long time, based on the sharp fall in stock prices across caps, sectors and stocks since the start of the war; things could still be derailed by further escalation in the ongoing conflict.
Sanjeev Prasad,
MD & Co-Head,
Strategy Note, Kotak Institutional Equities
Mumbai, April 3, 2026: The recent comments of the POTUS raise hopes about (1) an end to the ongoing Iran-Israel/US war and (2) normalization of crude oil and gas supplies over the next few months, thereby limiting the damage to the Indian economy and market earnings. However, we would caution that things could still be derailed by further escalation in the ongoing conflict.
Nobody can call the end of the war, except for the POTUS
The 2-3 weeks’ timeline for the end to the ongoing Iran-Israel/US war, as set by the US President, raises hopes for the end of the war, despite several conflicting and mixed messages over the past 1-2 weeks. The timeline would suggest either (1) the achievement of the strategic objectives of the US with respect to the degradation of the military and nuclear infrastructure of Iran or (2) assessment of the US’s position and prospects in the ongoing conflict and/or the negative economic and political fallout of a possible ‘endless’ war.
Higher odds of our base case scenario playing out
The statements of the POTUS have improved the odds of our base case scenario of (1) the conflict continuing for a few weeks, (2) elevated tensions for the next few months, (3) reopening of the Strait of Hormuz over the next few weeks and (4) no long-lasting damage to oil & gas infrastructure in the Middle East. Our base case scenario (see Exhibit 1 for various scenarios) entails elevated oil prices for the next few weeks and a decline in oil prices after ‘normalization’ in supplies from the Middle East to a ‘high’ plateau.
No major damage to earnings in the case of a short war, more if it drags on
We see limited earnings downgrades for FY2027E and FY2028E if (1) the Iran-Israel/US war ends within the next 2-3 weeks and (2) oil & gas supply conditions improve over the next few months. We note that the government has largely isolated Indian consumers and companies from the negative impact of higher retail oil prices for now. We would worry more about (1) weaker-than-normal monsoons due to potential El Nino conditions and (2) fertilizer shortages, which could result in a subpar summer crop. India has a reasonable food-grain buffer. Our earnings estimates have been illustrated for the Nifty-50 Index and KIE Coverage Universe.
Nobody can call the bottom of the market. Period!
The negative news cycle of the past few weeks with respect to the war and consequent supply disruptions appears to have hypnotized market participants into extrapolating the current negative environment in perpetuity or for a long time, based on the sharp fall in stock prices across caps, sectors and stocks since the start of the war.. As noted in our recent reports, the reward-risk balance has improved across more parts of the market, given the correction in valuations of the market and in many sectors and stocks.
