The Indian equity markets are looking at a thick silver lining after months of the conflict in West Asia rattling investors, as crude oil prices pull back. The cool off could mean big gains for many old economy sectors like Financials, Industrials, and Consumer Discretionary, JPMorgan pointed out in its equity strategy note.
Additionally, the brokerage said India's earnings outlook remains strong, with MSCI India earnings tracking over 20% year-on-year growth in the current quarter. It remains overweight financials, industrials, consumer discretionary, healthcare and materials, while staying underweight on information technology.
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Crude oil prices have corrected sharply following a blue wave sweeping through the United States House of Representatives and Senate on Wednesday, increasing hopes of a possible de-escalation in Iran war. Brent Crude traded at around $93.84 per barrel levels as if 9:05 a.m. IST.
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Since India imports 85-90% of its crude oil needs, cheaper crude translates into a lighter import bill, lower inflation, stronger Rupee, better corporate margins, and potentially higher consumer spends.
"Cheaper oil means a smaller import bill, a steadier rupee, lower inflation and fatter corporate margins," JPMorgan underlined.
Moreoever, the earnings season has fared better than expected so far and remains supportive to growth. The September quarter earnings are tracking above 20% growth year-on-year, consensus FY26/FY27 earnings estimates raised by 0.5%-0.6% over the past month, and 71% of reporting companies have beaten expectations so far, according to the brokerage. Looking ahead, the domestic demand and macro indicators remain healthy.
Who Will Reap The Most Gains?
JPMorgan Maintains an overweight rating on the following sectors and stocks:
Financials
- ICICI Bank
- SBI
- AU Bank
- Angel One
- HDFC Life
Industrials
- L&T
- Adani Ports
- NTPC
- Polycab
- Hitachi Energy
Consumer Discretionary
- Titan
- TVS Motor
Healthcare
- Divi's Laboratories
- Cipla
- Max Healthcare
- Fortis
Materials
- JSW Steel
- Pidilite
The brokerage pointed out that historically, sectors like real estate, consumer discretionary, and industrials advanced when the oil rally hit a pause. Therefore, he biggest beneficiaries may not necessarily be energy-intensive companies but domestic cyclical sectors linked to growth and consumption.
Indian IT Under Hawk's Eye
JPMorgan remains underweight on the Information Technology Sector solely because of the AI race as it remains the most vulnerable to any disruptions caused by boom in artificial intelligence.
"AI's impact on India is most immediate in IT services. Analysts estimate around 80% of current IT services revenue pools face contraction risk from AI, while only about 20% have expansion potential. Slower hiring, weaker demand for entry-level roles and job losses could weigh on household incomes and consumption, particularly in cities with high concentrations of technology jobs," the brokerage underlined in its note.
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