Israel-Iran crisis presents good opportunity to buy quality stocks: Analysts

Stock market today, Israel-Iran conflict: Equities across the world, including India, came under heavy selling pressure on Monday, April 15, amid rising geopolitical tensions between Iran and Israel. Both Sensex and Nifty declined over 1 per cent while US stocks closed sharply lower. The Dow Jones Industrial Average fell 248.13 points, or 0.65 per cent, to 37,735.11, the S&P 500 lost 61.59 points, or 1.20 per cent, to 5,061.82, and the Nasdaq Composite lost 290.07 points, or 1.79 per cent, to 15,885.02.

Commenting on yesterday's trade on Dalal Street, Vinod Nair, Head of Research at Geojit Financial Services, said, "Geopolitical tensions and higher-than-expected US inflation impacted investor sentiment and dragged the indices to a lower note. The major casualties were the mid-and small-cap indices due to their rich valuation and expectation of moderation in earnings growth in Q4 FY24."

What should investors do?

Analysts believe that the two countries will find a compromise, as a fight between two smaller countries cannot drag major countries into a bigger war, which can ultimately lead to a world war. Big countries need big sacrifices to get into a full-fledged war, and they are not ready for it. Soon, global pressures will compel the countries to restrain and reach a truce. 

"My point is that this localised war cannot become a world war. However, if this doesn’t happen, then the localised war would continue like what is going on in Ukraine, and global markets would learn to live with that. Hence, we believe that current global political tension is a good opportunity to buy quality stocks with relatively attractive valuations in the Indian markets for medium- to long-term investments," said G Chokkalingam, founder and MD of Equinomics Research.

Dr. V K Vijayakumar shares similar views. In his words, "Investors may wait and watch the developments. Meanwhile, long-term investors can slowly accumulate high-quality large-caps on corrections. Further corrections will make the valuations of large caps fair. Largecaps in banking, IT, autos, capital goods, oil & gas, and cement are ideal for long-term investment," the expert adds.

Since metal prices are firming up, metal stocks will remain resilient, the expert says further.

Ambareesh Baliga, an independent market analyst, on the other hand, says that the markets were anyway overpriced with froth, especially in the mid-and small-caps. Liquidity could have driven it further to new highs, possibly Nifty to 23,500, before the election results in June 2024.

Most of the corporate news flows and domestic macro numbers were benign, and it was assumed that nothing could stop a continued rally. In times like these, unknown factors can rock the apple cart. And this geo-political issue between Israel and Iran seems to have done just that.

Technically, 22,000 is a good sentimental support level for Nifty, "below which we could see investor panic and further sharp downside. As long as we hold above the range, the ‘hope’ trade will play out with bounce-backs to 22,500/22,600 levels. We need to keep a close watch on whether the geo-political issue escalates, and the next few days will be crucial. As of now, the countries involved, including the USA, have displayed restraint, which is positive for the markets," Baliga added.