Stock market strategy: Where to invest as Israel war escalates, oil rises

Stock market crash: The BSE benchmark has tumbled nearly 3,500 points from its record high level of 85,978 level, touched on September 27, 2024

Stock market today, Stock market crash news: The ongoing correction in the Indian stock market may be nearing its bottom, analysts said on Thursday, as they expect the Iran-Israel war to turn into a "localised" affair over the medium-term.

At best, they expect the benchmarks -- BSE Sensex and Nifty50 -- to slide another 2-3 per cent here on and suggest investors use the dips to buy into quality large-caps and select mid, smallcap stocks.

"The Middle East war may become a localised war, like the Russia-Ukraine war, with people accepting it as a 'part of life'. We believe equity markets may remain volatile in the near-term, correcting another 1-3 per cent till Israel's response to Iran's missile attack is unknown," said G Chokkalingam, founder and head of research, Equinomics Research.

 

The BSE Sensex, today, plummeted 1,832 points intraday, breaking the 82,500-mark in the process. The Nifty50, too, sank 567 points, giving up the 25,250-mark during the day.

At close, however, the BSE Sensex stood at 82,497, down 1,769 points or 2 per cent. The Nifty50, on the other hand, broke the 25,300-mark to close at 25,250, down 547 points or 2.12 per cent, making investors poorer by Rs 9.6 trillion.

The BSE benchmark has tumbled 3,481 points from its record high level of 85,978 level, touched on September 27, 2024.

The Nifty50, on its part, has shed 1,027.5 points from its lifetime high of 26,277, touched on the same day.

In the broader markets, the Nifty MidCap100 index has fallen 1,901 points and the Nifty SmallCap100 index has crashed 688 points from their respective 52-week highs.

"Every aged bull-run needs a healthy correction and this war-triggered correction has only escalated that. As the markets are expected to remain jittery in the near-term, we advise investors to use this opportunity to enter quality large-caps from a long-term perspective," said Gaurav Dua, senior vice-president, head-capital markets strategy, Sharekhan.

He advises investors to bet on pharmaceutical and fast moving consumer goods (FMCG) companies offering valuation comfort.

Oil on the boil

Brent crude price has rallied about 4 per cent since Iran's attack late Tuesday. While this triggered a sell-off in major oil-linked stocks, such as those from the oil marketing, paints, aviation, and tyre sector, analysts believe the rise is insignificant given that the world's top oil producing countries are engaged in a war.

That apart, Reuters reported that Organization of the Petroleum Exporting Countries (Opec) and its allied members (Opec+) left oil output policy unchanged on Wednesday, including a plan to start raising output by 180,000 barrels per day (bpd) December onwards.

"Consumption and infrastructure (cement)-related companies may feel the heat as the recent uptick in oil prices could lead to an uptick in their raw material costs. Investors, however, may use this dip to buy quality names in the space," said Vinod Nair, head of research at Geojit Financial Services, who also prefers information technology (IT) and Pharma as a sector for the long-term.

G Chokkalingam of Equinomics Research said over-valued and 'perception driven' small and mid-cap stocks may test the waters for some more time.

"Thus, investors with conservative risk profiles could hold up to 15 per cent in cash and gold, half of the remaining 85 per cent in largecaps and the balance in quality SMC stocks," he said.

From a technical viewpoint, analysts advise traders to adopt a 'sell on rise' strategy, while long-term investors, they said, may use this correction to buy large-cap stocks, where valuations have become attractive.

"With the Nifty breaching multiple supports—such as the 20-day exponential moving average (DEMA) around the 25,580 level and trendline support near 25,350—the market could face further downside. We are now looking at the 25,000-25,150 zone as the next support, while any rebound is likely to be capped in the 25,450-25,600 range. Traders should adjust their positions accordingly, using any recovery to reduce longs and initiate shorts in weaker pockets," said Ajit Mishra, senior vice president for research, Religare Broking.