Sensex, Nifty: India among 3 'vulnerable' stock markets in Asia, says Nomura

Nomura in its fresh Asia strategy note on Monday warned that any sustained rise in oil prices, due to supply disruptions will be negative for Asian equities, which are mostly net-energy importer countries. It called India, Indonesia and the Philippines, all twin deficit countries, as the most vulnerable equities markets.

Nomura said some short-term profit taking from equities in Korea and Taiwan, where momentum is strong and positioning appears stretched, is likely. But it does not expect a lasting damage on the said markets. 

"In contrast, countries less dependent on energy imports like Malaysia (and with current account surplus to help) might prove to be more resilient. In the case of Hong Kong/China equities, we think the outlook will depend on whether there is any sustained impact on oil imports from the region," it said.

On Monday, Sensex settled at 80,238.85 on Monday, down 1,048.34 points or 1.29 per cent. Nifty ended the day at 24,865.70, down 312.95 points or 1.24 per cent. In contrast, China's Shanghai Composite ended 0.45 per cent higher at 4,182.59. Japan equities, as suggested by Nikkei 225, fell 1.35 per cent to 58,053. Hong Kong's Hang Seng declined 2.14 per cent to 26,059.85. Korea and Taiwan markets were shut for the day. 

"Notably, tensions had already been rising ahead of that event with oil prices already up $4 per barrel. How long this conflict lasts and how oil prices react to these events, we think, will be the key to monitor for risk sentiment," it said.

Historically, said Nomura, beyond initial short-term reaction, markets have tended to look through geopolitical tensions. 

In the most recent episode, during the ‘twelve-day war’ between Iran and Israel in June 2025, US stocks were largely unscathed even when oil prices spiked by $10 per barrel when Israel attacked Iran’s nuclear facilities, Nomura said. 

Nomura said Thailand, India and Korea are the largest net importers of oil (relative to GDP) at 4.7 per cent, 3.1 per cent and 2.7 per cent, respectively; and this spike in oil prices will hit current account positions.

Nomura economists noted that India imports more than 85 per cent of its domestic oil needs, and latest vessel tracking data suggest around half of its crude oil imports currently transit through the Strait of Hormuz. 

In FY25, Iraq, Saudi Arabia, UAE and Kuwait (in the Persian Gulf) cumulatively comprised close to 46 per cent of India’s annual crude oil imports, underlining the importance of this chokehold for India’s energy security. 

"Additionally, pressure from the US has led to a sharp drop in India’s crude oil shipments from Russia, versus a 35 per cent share in FY25. That said, a regime change in Iran could lead to a dismantling of its sanctions, and India could benefit from the increase in global supply of crude oil as a consequence over time," Nomura said.

The foreign brokerage said higher crude oil prices should lead to higher retail prices of fuel products and increased inflation. 

"The RBI estimates that a 10 per cent increase in global crude oil prices leads to a 0.15pp drop in GDP growth and ~0.3pp increase in inflation, but this is based on the old inflation series, while the new one has doubled the combined weightings of petrol and diesel (to 4.8 per cent from 2.3 per cent), which should also raise the sensitivity of CPI inflation to oil price changes, if fully passed," it said.