A growing number of global brokerages are trimming their year-end targets for India’s benchmark stock indices as the escalating conflict in the Middle East pushes oil prices higher and threatens to disrupt critical supply chains, raising concerns about economic growth and corporate earnings.
Citi Research has cut its year-end target for the Nifty 50 to 27,000 from 28,500 earlier, citing mounting risks to India’s growth and corporate earnings outlook as the war in West Asia intensifies.
The revised target implies about 17% upside from the index’s most recent close.
The action comes as Brent crude oil prices climbed sharply to hit more than $106 per barrel on Monday.
The brokerage also reduced its valuation assumptions, lowering the Nifty’s target multiple to 19 times one-year forward price-to-earnings from 20 times earlier.
Source: Reuters
According to analysts led by Surendra Goyal, the impact on India’s economy will depend largely on the duration and severity of supply disruptions caused by the conflict.
Citi estimates that a three-month supply disruption could shave 20 to 30 basis points from India’s growth in fiscal year 2027.
It could also push inflation higher by 50 to 75 basis points, widen the fiscal deficit by about 10 basis points and add roughly $25 billion to the current account deficit.
The brokerage expects the Reserve Bank of India to remain on pause in its April policy meeting, although its policy stance could tilt toward supporting growth if fiscal measures absorb much of the inflationary pressures.
Supply disruptions threaten multiple sectors
Analysts say the conflict is gradually shifting from a pure oil price shock to a broader supply constraint that could affect several commodities critical to Indian industries.
According to Citi, the disruptions could extend beyond crude oil to include liquefied petroleum gas, liquefied natural gas, fertilisers, petrochemicals and aluminium.
Such supply pressures could drive up input costs for sectors ranging from automobiles and construction to pharmaceuticals, paints and shipping.
Source: Reuters
Fertiliser and petrochemical sectors are seen as particularly vulnerable because of India’s reliance on imports from the Middle East.
Reflecting these risks, Citi downgraded the automobile sector to neutral from overweight.
The brokerage also removed Mahindra & Mahindra from its list of top picks and dropped Mahanagar Gas from its preferred mid-cap selections.
Nomura also trims market outlook
Separately, Nomura has also reduced its December 2026 target for the Nifty 50 by about 15% to 24,900, down from its earlier projection of 29,300.
Although the revised target still suggests about 7% upside from current levels, the brokerage warned that sustained high oil prices could weigh heavily on corporate earnings.
Nomura estimates that consensus earnings forecasts for fiscal year 2027 could face a downside risk of 10 to 15% if crude prices remain elevated.
The brokerage has lowered its base-case earnings assumptions by 7.5% and reduced the Nifty’s valuation multiple to 18.5 times from 21 times earlier.
“We reset our Nifty target at 24,900 from 29,300 earlier. Our base case assumes a 7.5% reduction in consensus earnings estimates with a P/E multiple at 18.5x (earlier 21x). We see December Nifty target in the range of 21,000 – 29,100 with our bull-case assuming an immediate de-escalation of geopolitical tensions,” wrote Saion Mukherjee, head of India equity research at Nomura in a recent note.
Market correction may deepen
The recent market decline has already reflected some of these concerns.
Both the Nifty 50 and the BSE Sensex have fallen into a technical correction after dropping about 10% from record highs.
Nomura said valuations based on price-to-earnings ratios and spreads over bond yields are currently near the lower end of the range seen over the past four years.
However, the brokerage warned that an additional 5% correction cannot be ruled out in the near term, particularly if geopolitical risks persist.
Smaller companies may face greater pressure, as small- and mid-cap stocks are generally more vulnerable during periods of market stress and adverse capital flows.
Defensive sectors may outperform
In the current environment, analysts expect defensive sectors to perform relatively better.
Nomura believes coal producers, oil companies, healthcare, pharmaceuticals, consumer staples and telecom firms could outperform the broader market during the ongoing correction.
Even so, the brokerage cautioned that valuations in sectors such as healthcare and consumer staples already appear relatively expensive.
For investors, the trajectory of oil prices and the duration of the Middle East conflict will remain critical variables shaping the outlook for Indian equities in the months ahead.
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