Nifty below 19,000, rupee at 110! Bernstein cuts index target, says this on worst-case scenario

Bernstein on Wednesday cut Nifty's year-end target to 26,000, saying the 50-pack index may even fall below 19,000 level in its worst case scenario. The foreign brokearge said India’s bright story on the global stage for the last several years had one common denominator, which is crude prices staying at exceptionally low levels.

From 2014 to 2021, there were barely three weeks around October 2018 where crude briefly crossed even $80 a barrel level. The foreign brokerage noted that even during the peak of Russia-Ukraine conflict, the crude stayed above $100 for a period from March-August 2022, and declined below $80 a barrel by early 2023. This, it said, exposes the vulnerability of India to external shocks. 

"If one were to consider the conflict lasting for much of 2026, the repercussions could be catastrophic: supply risks, double-digit inflation, economic growth in 2-3 per cent range, rupee beyond 110 and Nifty going well below 20,000. Higher rates necessitated as a result would effectively kill any credit recovery for several quarters," the brokerage said.

Bernstein said its bull case denotes a 2 per cent cut to its earlier Nifty target of 28,100 at the start of this year. The bear case is not a zero probability event and could see multiples contract to decadal lows with massive damage to eupee and markets even below the 19,000 level, it said.

"Our highest probability case renders a Nifty target of 26,000, a mild derating - implying a 13 per cent upside from current levels and a 7 per cent contraction from our target at the start of the year," Bernstein said.

Bernstein said while war may end, things have changed fundamentally for India. It retained its view that lack of a support back home, heavy US losses, elevated crude and mid-terms in US this year should eventually put an end to the conflicts, which are unlikely to last beyond April. 

"However, this has changed things structurally. The damage at some of the oil and gas infra means the issue is no longer incidental to the Strait of Hormuz. The recovery time may take anywhere from a few days to months. Moreover, we expect several nations to up their buying and shore up petroleum reserves once the situation eases," it said.

This should mean crude is likely to stay elevated this year, even though it returns below $100 a barrel. 

"We see realistic chances of inflation breaching 6 per cent this summer, rate cuts to get pushed for two quarters at the least, and GDP growth to taper," it said.