Stock market strategy: Buy the dip or stay cautious? Analysts list key sectoral bets amid US-Iran war

Since the start of the US-Iran war in late February, Indian markets have come under sustained pressure, with investors grappling with rising crude oil prices, a depreciating rupee, and persistent foreign fund outflows. The Nifty 50 has declined around 6-7% during this period, while Brent crude has surged more than 52% to around $110 per barrel as of Tuesday, 19 May. At the same time, the rupee has weakened nearly 6% against the US dollar, reflecting mounting stress on India’s external position.

While oil prices fell slightly after US President Donald Trump announced he had cancelled a planned strike on Iran at the request of Gulf allies, the ongoing uncertainty over the conflict and the Strait of Hormuz continues to keep energy markets anxious.

The pressure on the rupee has increased due to high crude imports, lacklustre capital inflows, and persistent selling by foreign portfolio investors (FPIs) of over $20 billion in Indian equities. India’s merchandise trade deficit widened to $28.38 billion in April, driven by rising oil imports, heightening concerns about the current account deficit.

With inflation risks, currency weakness, and growth concerns persisting, investors are increasingly seeking the right trading strategy and sectors that can weather prolonged geopolitical and macroeconomic volatility.

Lower crude seen as a positive trigger for Indian markets

According to Sunny Agrawal, Head of Fundamental Research at SBI Securities, the potential US–Iran ceasefire should be viewed as a “lower crude, macro-positive” development for India, given the country’s heavy dependence on oil imports.

Sectoral shift towards domestic cyclicals

Agrawal believes a sustained correction in crude oil prices could improve India’s current account balance, ease inflationary pressures and support rupee stability, creating a favourable environment for equities. In such a scenario, he expects investors to rotate away from upstream oil and gas stocks and defensive plays toward domestic cyclicals and rate-sensitive sectors.

Financials, autos and consumption stocks in focus

Further, Agrawal remains overweight on sectors such as financials, automobiles, consumption-driven plays including airlines and paints, as well as capital goods, which could benefit from lower input costs, margin expansion and improving demand momentum.

Cautious sentiment amid global uncertainty

Meanwhile, Antu Eapen Thomas, Senior Research Analyst at Geojit Investments, said investor sentiment remains cautious amid the prolonged Gulf conflict, with elevated bond yields, high crude prices, and a weakening rupee continuing to stoke inflation concerns.

Staggered investment strategy preferred

Thomas said a staggered investment approach appears more prudent than waiting for complete clarity. He added that attractive valuations and resilient Q4 earnings support selective buying opportunities, with a preference tilted towards large-cap stocks for stability, while exposure to mid-caps should remain stock-specific, driven by earnings visibility and fundamentals.

Nifty 50 key levels

According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, the Nifty 50 is currently witnessing a consolidation phase on the daily charts, with the index repeatedly defending the crucial 23,300 zone over the past week. He noted that this level coincides with the 50% retracement of the rally from the April low of 22,180 to the recent high of 24,600.

Bhosale said the 23,300–23,100 zone remains a critical support area for the benchmark index, with the lower end aligning with the 61.8% retracement level. On the upside, the 23,850–23,900 range is likely to act as immediate resistance as it coincides with last week’s high and the 20-day exponential moving average (DEMA).

He further highlighted that the hourly chart indicates a double-bottom formation, along with positive divergence around the 23,300 mark. A decisive breakout above 23,900 could trigger fresh bullish momentum, potentially pushing the Nifty towards the 50 DEMA at 24,150 and beyond.

Bhosale added that traders should closely monitor the 23,300–23,100 support band and the 23,850–23,900 resistance zone, as the next meaningful directional move is likely only after a breakout from this range.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.