Stocks may drop further as West Asia's conflict hits Indian bottomlines, supply chains
The benchmark Sensex dropped 6.5 percent in the past 42 sessions as investors fretted over corporate India’s stagnant earnings over the past eight quarters.
- Mar 2, 2026,
- Updated Mar 2, 2026 4:01 PM IST
Dalal Street, already the worst performing major equity market in 2026, is likely to get buffeted as West Asia’s war hits domestic earnings and disrupts global logistics, analysts say.
The benchmark Sensex dropped 6.5 percent in the past 42 sessions as investors fretted over corporate India’s stagnant earnings over the past eight quarters and the lack of Artificial Intelligence’s presence in the heavy weight domestic software sector which saw stock prices of IT companies such as Infosys, TCS and HCL Tech collapse between 11-30 percent since January.
Add to this toxic cocktail India’s rising import bill as the country buys 85% of its energy needs from overseas and imports hundreds of tons of gold and silver each month, prices of whom have surged between 86-200 percent over the past 12 months. A rising trade deficit has never been good for equities.
“The Middle East’s Straits of Hormuz sends 50 percent of Indian oil imports and is critical to the Indian economy,” said Sunil Shah, Fund Manager at SRE PMS. Mumbai-based Shah feels stock valuations remain ripe for further corrections. “Over 55% of listed stocks are trading at a PE of above 30. We see a time and price correction in the absolute near term.”
More than Rs 10 lakh crore of investor wealth was wiped out as the Nifty closed 1.2 percent down to its lowest since September 2025.
Meanwhile, the ongoing war between the Islamic Republic of Iran on one side and a coalition of the United States and Israel enters its third day. Iran’s supreme religious leader, Ali Hosseini Khamenei and more than three dozen senior Iranian political and military officers, were assassinated by Israeli and American militaries on Saturday. Tehran has retaliated across the Middle East, causing a spike in global oil prices, which are now at 8-month highs.
As a consequence, global shipping, the life blood of all economies, has paused. Airlines have canceled hundreds of flights across the world and companies are reworking supply chains to get raw materials and ship finished goods as before.
Meanwhile, InterGlobe Aviation Ltd (IndiGo), the nation’s top airline, dropped 6.5 percent on Monday, to a 12-month low as it reworked flights and grappled with surging oil prices, its main raw material. Similarly, Larsen & Toubro, India’s top engineering firm, fell 5 percent as a large part of its construction order book flows via the Middle East.
This is not all. Paint companies and tyre manufacturers, whose raw material costs are linked to crude oil prices, basmati rice exporters were among 800 stocks that hit fresh 52-week lows on fears that this conflict could escalate. Leaders from both sides have made inflammatory statements, fueling fear in investors.
However, a decent fall in equities presents an opportunity for seasoned investors to buy into secular growth and earnings stories. Data from the past 3 decades shows how stocks have surged at the near-end of hostilities. Dalal Street has always recovered from the aftermath of the two Gulf Wars, the Kargil conflict and the earlier flare ups between Iran-Israel and India-Pakistan.
Shah, a very well-known stock picker over the past two decades, is himself hunting for value in the Defence sector and among PSU banks.
‘’Basically, I am looking for stocks where the impact of AI is the least,” Shah says, adding Shipping Corporation, Garden Reach Shipbuilders and a few PSU banks were on his radar.
Dalal Street, already the worst performing major equity market in 2026, is likely to get buffeted as West Asia’s war hits domestic earnings and disrupts global logistics, analysts say.
The benchmark Sensex dropped 6.5 percent in the past 42 sessions as investors fretted over corporate India’s stagnant earnings over the past eight quarters and the lack of Artificial Intelligence’s presence in the heavy weight domestic software sector which saw stock prices of IT companies such as Infosys, TCS and HCL Tech collapse between 11-30 percent since January.
Add to this toxic cocktail India’s rising import bill as the country buys 85% of its energy needs from overseas and imports hundreds of tons of gold and silver each month, prices of whom have surged between 86-200 percent over the past 12 months. A rising trade deficit has never been good for equities.
“The Middle East’s Straits of Hormuz sends 50 percent of Indian oil imports and is critical to the Indian economy,” said Sunil Shah, Fund Manager at SRE PMS. Mumbai-based Shah feels stock valuations remain ripe for further corrections. “Over 55% of listed stocks are trading at a PE of above 30. We see a time and price correction in the absolute near term.”
More than Rs 10 lakh crore of investor wealth was wiped out as the Nifty closed 1.2 percent down to its lowest since September 2025.
Meanwhile, the ongoing war between the Islamic Republic of Iran on one side and a coalition of the United States and Israel enters its third day. Iran’s supreme religious leader, Ali Hosseini Khamenei and more than three dozen senior Iranian political and military officers, were assassinated by Israeli and American militaries on Saturday. Tehran has retaliated across the Middle East, causing a spike in global oil prices, which are now at 8-month highs.
As a consequence, global shipping, the life blood of all economies, has paused. Airlines have canceled hundreds of flights across the world and companies are reworking supply chains to get raw materials and ship finished goods as before.
Meanwhile, InterGlobe Aviation Ltd (IndiGo), the nation’s top airline, dropped 6.5 percent on Monday, to a 12-month low as it reworked flights and grappled with surging oil prices, its main raw material. Similarly, Larsen & Toubro, India’s top engineering firm, fell 5 percent as a large part of its construction order book flows via the Middle East.
This is not all. Paint companies and tyre manufacturers, whose raw material costs are linked to crude oil prices, basmati rice exporters were among 800 stocks that hit fresh 52-week lows on fears that this conflict could escalate. Leaders from both sides have made inflammatory statements, fueling fear in investors.
However, a decent fall in equities presents an opportunity for seasoned investors to buy into secular growth and earnings stories. Data from the past 3 decades shows how stocks have surged at the near-end of hostilities. Dalal Street has always recovered from the aftermath of the two Gulf Wars, the Kargil conflict and the earlier flare ups between Iran-Israel and India-Pakistan.
Shah, a very well-known stock picker over the past two decades, is himself hunting for value in the Defence sector and among PSU banks.
‘’Basically, I am looking for stocks where the impact of AI is the least,” Shah says, adding Shipping Corporation, Garden Reach Shipbuilders and a few PSU banks were on his radar.