Iran-Israel Conflict Sparks Volatility Concerns for Indian Stock Market

Mumbai — Rising geopolitical tensions between Iran and Israel are weighing on investor sentiment globally, with Indian markets poised for a pause after a sharp 10% rally in the Nifty since April 9, 2025. According to Emkay Global, the conflict has introduced fresh uncertainty, with crude oil price surges posing near-term risks to India’s current account deficit, fiscal balance, and inflation.

While the brokerage expects the impact to be temporary, it warns that sustained oil prices could affect foreign inflows and pressure key sectors such as oil marketing companies, automakers, and consumer staples. Rising input costs may also hit API producers and chemical manufacturers.

Emkay remains bullish on India’s medium-term growth, backed by expected RBI rate cuts, softening global commodities, and resilient mutual fund flows. However, it forecasts a market breather due to valuation pressures, with 38% of BSE200 stocks now trading above 5-year averages, up from 12% in April.

The firm maintains its overweight stance on Discretionary, Technology, and Materials, while remaining underweight on Financials and Staples. Small and midcaps are expected to outperform, given stronger earnings and improved balance sheets.