Indian markets slip but show resilience even as global geopolitical risks mount: Rahul Ghose

Economic Times

15-06-2025

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Indian benchmark indices Sensex and Nifty50 closed lower on Friday, mirroring sharp declines across Asian markets as Israel's military strikes on Iran intensified geopolitical tensions in the oil-sensitive Middle East.The BSE Sensex slipped 573 points (0.70%) to settle at 81,118, while the NSE Nifty dropped 169 points (0.68%) to end at 24,718. Earlier in the session, market sentiment had sharply deteriorated, with the Sensex tumbling over 1,337 points to 80,354 and the Nifty hitting an intraday low of 24,473.With this, analyst Rahul Ghose , Founder and CEO of Octanom Tech and Hedged.in interacted with ET Markets regarding the outlook on Nifty and Bank Nifty along with an index strategy for the upcoming week. The following are the edited excerpts from his chat:The escalation of the Iran-Israel conflict has significantly heightened volatility across global markets. Following Israel's airstrikes on Iranian military and nuclear facilities, global equities saw sharp declines, with the Dow Jones Industrial Average falling over 600 points and oil prices surging as much as 13%. Investors are moving towards safe-haven assets like gold, which has also seen a notable uptick. The primary concern is the risk of further escalation, especially if the Strait of Hormuz, through which asubstantial portion of the world's oil supply transits—faces disruption. This scenario could push oil prices even higher, potentially reaching $120 per barrel if the conflict widens.Indian equity markets have not been immune to these shocks. The Nifty 50 and Sensex both ended lower on June 13, 2025, with the Nifty closing down 170 points at 24,719 and the Sensex down 574 points at 81,119. The immediate impact has been most pronounced in sectors sensitive to crude oil prices, such as oil marketing companies (OMCs), aviation, paints, and tyres, all of which saw significant declines. The rupee faces depreciation pressure, and inflation risks are rising due to India's heavy reliance on imported oil, over 80% of its crude requirements.But what is important to observe in Indian markets is its resilience. After gapping down almost 300 points, the Indian markets were quick to recoever.Nifty recovered from the lows of 24520 to close at 24736.This is because, It is largely believed that if the conflict remains contained and does not drag on, the macroeconomic impact on India could be limited.Retail inflation is currently at a six-year low, but a prolonged conflict and sustained high oil prices could widen the current account deficit and reignite inflationary pressures.Technically, the charts are not showing any major signs of big correction. Nifty on the weekly as well as time frame is in sideways trading range with a strong support at 24163-23930, & a strong resistance at 25000-25200.On the lower side unless 23900 breaks, bulls don't have any major reason to worry.However, it is likely that even the upside will also be capped in the sort-term &one would see markets trading in sideways trading range.Bank Nifty, closely tied to overall economic sentiment and liquidity, is also under pressure. Rising crude prices can lead to higher inflation and interest rates, which typically dampen banking sector performance. Technically, weekly chart of Bank Nifty has closed with a strong engulfing bear candle suggesting selling pressure. However, as this bearish candlestick pattern is neither coming at a resistance level, nor in an overbought territory. One need not worry too much about this engulfing bearcandle & infact, expect that this correction in Bank Nifty will be bought into. The gap level of 54,000-53,400 can act as a strong support followed by 51,860-51,200.The probability of Bank Nifty breaking the second level of support is very low.The following sectors are particularly vulnerable to the current geopolitical situation:• Aviation: Heavily impacted by rising ATF (aviation turbine fuel) prices, which constitute a majoroperating cost. The tragic Air India incident adds to sectoral headwinds.• OMCs (Oil Marketing Companies): Stocks like HPCL, BPCL, and IOC have dropped sharply ashigher crude prices squeeze margins.• Paints, Tyres, Adhesives: All are significant consumers of crude oil derivatives and face margin pressure as input costs rise.Technically too, most of the bellwether stocks in these sectors are in a sideways to downtrend, corroborating the fundamental view.It is a rising opportunity.Defence stocks are likely to benefit from heightened global tensions. Increased government focus on indigenization, higher budget allocations, and export opportunities for Indian defense manufacturers could drive outperformance in this sector. Geopolitical instability tends to accelerate defense spending, both domestically and globally, providing a tailwind for listed defense companiesOil marketing companies are facing a double whammy of rising input costs and potential regulatory pressures to keep retail prices in check. Their margins are under severe strain, as evidenced by the sharp sell-off in their stocks. Unless crude prices stabilize or the government allows full pass-through to consumers, OMCs could continue to underperform.Aviation stocks are among the hardest hit. Rising crude prices directly increase fuel costs, pressuring already thin margins. The recent Air India tragedy further dampens sentiment, potentially impacting passenger demand and sector confidence. Considering the magnanimity & scale of the incidence it will take some time for the sector to recoup & regain investor confidence.Until oil prices retreat and geopolitical risks abate, the outlook for aviation remains challenging. Technically, Indigo is showing signs of topping out in the short-term, with multiple spinning top candles on the monthly time frame charts, along with negative divergence in RSI. One can see some profit booking in this space.Given the current environment, from the fundamental & technical standpoint, one can focus on the following sectors:• Defence: Benefiting from rising global and domestic security spending.• IT and Pharma: Traditionally defensive, with global revenue streams and less sensitivity to oil prices.• Domestic Consumption: Select consumer staples and FMCG, which tend to be resilient during periods ofglobal uncertainty.• Energy Producers: Companies like ONGC and Oil India, which benefit from higher crude prices.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)