Stock Market Outlook: Indian equity markets may see a further downside of nearly 10 per cent from current levels if ongoing geopolitical tensions continue to drag on, according to Sameer Dalal, Owner of Natverlal & Sons Stockbrokers. Dalal cautioned that prolonged uncertainty driven by U.S. President Donald Trump’s positioning and escalating Middle East conflicts could keep oil prices elevated for longer, delaying a meaningful recovery in Indian equities and putting pressure on corporate earnings.
Dalal said the impact of sustained high crude prices is already visible across sectors. “The more it is prolonging and the more it is going on, the delay in the returns for Indian equity because Indian corporate earnings will take a hit is getting longer,” he said.
Hehighlighted disruptions across refining capacities in the Gulf Cooperation Council (GCC), warning that downstream industries could face sharp cost pressures. “We already know a lot of refining capacities have been hit across the GCC, which means the final refined product that comes out is going to be lower,” Dalal said. This, he explained, would affect a wide range of crude‑linked products. “All your downstream products… PET‑chem, polymers, plastics, chemicals for various industries, pharma included, are going to see a spike and see an elevated spike,” he said.
According to Dalal, companies are left with limited options. “Either these companies pass on the increase, which leads to a massive inflationary pressure, or they take a hit in margins. And if they take a hit in margins, it means earnings go down, and then the valuation starts looking even more expensive,” he said. “So either way is showing up as a bit of a negative.” Dalal also flagged stress among small and medium enterprises, particularly those dependent on crude‑derivative inputs.
“The MSMEs, which were working on short lead times for a lot of these products, which come from crude derivatives, were running out of inventory, while many of them are out and they’re barely able to service their operations,” he said. He said that this becomes especially dangerous for firms carrying leverage on their balance sheets.
“When you have debt on your balance sheet, it kind of puts you in a very bad position,” Dalal said. “You may be able to survive if it goes on for a little bit longer on the cash that you’ve made, but if it extends beyond another month, I think what you’re going to see is NPAs rising in the banks.”
While bank stocks have recently rallied on the back of the fourth quarter business update, Dalal cautioned against reading too much into backward‑looking data. “Yesterday, the market took a massive run‑up because of the numbers they reported, but that is like driving your car looking in the rearview mirror and not looking forward,” he said. Looking ahead, he warned that slowing growth and rising stress could create a “double whammy” for the banking sector.
Dalal said his stance has shifted from cautious optimism to waiting on the sidelines. “Even though we were saying, look to invest because we thought it (the conflict) would end, my view right now has become kind of wait for a little bit longer,” he said. “See when it actually ends, because if it doesn’t end, I see the markets down another 10 per cent from here.”
