Indian markets showed partial recovery after the Sensex index fell by nearly 1700 points on Wednesday, rising by about 700 points during Thursday's trading session.
Impact of Geopolitical Tensions
The volatility observed in the last two trading days was triggered by new tensions in the Middle East, specifically threats from President Donald Trump regarding additional military strikes against Iran. These events caused a surge in crude oil prices: Brent exceeded the $80 per barrel mark, and WTI approached $76 on Wednesday, although both figures slightly decreased on Thursday.
Traders' Strategies and Forecasts
Analysts note that the recovery of Indian stock markets on Thursday was primarily driven by buying assets at lower prices. Nevertheless, they advise investors to remain cautious, as geopolitical changes and corporate reports for the period April-June 2026 (Q1FY27) may keep markets unstable.
Shrikant Chauhan, Head of Equity Research at Kotak Securities, stated that the short-term market structure has become negative. He believes that the preferred strategy for day traders will be selling on rallies. According to his analysis, immediate resistance levels are set at 24,050 (Nifty) / 77,100 (Sensex) and 24,150/77,400.
Chauhan added that as long as the market trades below these levels, negative sentiment is likely to persist. In case of a decline, Nifty is likely to test its 50-day Simple Moving Average (SMA), located around 23,800/76,000. A sustained fall below this level could lead to a correction to 23,600/75,800. It is also recommended to reduce weak long positions upon any pullback to the 24,100–24,200 zone.
The reverse situation is possible if the index exceeds 24,050 / 77,100; then a pullback followed by a rise into the range of 24,150 –24,200 / 77,400–77,500 cannot be ruled out.
Risk Assessment and Buying Activity
VK Vijayakumar, Chief Investment Strategist at Geojit Investments, believes that concerns may be exaggerated. He notes that the Brent price of $80 does not pose a problem as it will not lead to a balance of payments (BoP) crisis. A crisis, in his opinion, would only arise if new waves of tension in the Middle East again led to the closure of the Strait of Hormuz and, consequently, a rise in crude oil prices (Brent) above $100.
Vijayakumar emphasized that the current situation does not reflect such a pessimistic scenario, as September crude is trading at $76, indicating that the market does not believe in an escalation. He added that global markets have not panicked, but the scenario requires close monitoring.
Another important factor is the continuing trend of increasing buying activity from FIIs in Indian stocks. Over the last four trading days, FIIs have been buyers in India, acquiring shares worth 3,954 crore rupees in the money market.
According to Vijayakumar, this trend may continue provided that crude oil prices remain stable. He predicts that large companies, as well as the finance and automotive sectors, are likely to remain resilient.
Macroeconomic Support for the Market
Although tensions in the Middle East may keep markets in a state of uncertainty in the short term, G Chokkalingam, founder and head of research at Equinomics Research, believes that supportive domestic macroeconomic factors will mitigate negative sentiment. He expects President Trump to change his stance on the Middle East issue again, as he has done previously.
Chokkalingam noted that the monsoon season has resumed in the country, which is a positive sign for the economy and markets. The impact of the Middle East war on company profits in the first quarter of fiscal year 2027 has largely been accounted for by the market. Although markets may be volatile in the near term, he forecasts a growth of approximately 5 percent over the next three months due to favorable domestic macroeconomic conditions, provided that events in the Middle East do not escalate into a full-scale war.
