Prolonged conflict in West Asia could push the Nifty below 24,500: Analysts

A prolonged conflict in West Asia could drag the Nifty 50 index below 24,500 levels, down around 1.6 per cent from the current levels, suggest analysts. The immediate casualty of the ongoing conflict, they said, would be a sharp rise crude oil prices that is likely to limit the government's capital spend.

 

Historically, market drawdown around geopolitical shocks, analysts suggest, have tended to be short-lived, but the current conflict in West Asia has more direct channels into India’s economy. 

 

A lot, believe analysts at Bernstein, will depend on how quickly hostilities end: a shorter conflict that resolves decisively in favor of the US could materially reduce the macro hit and even leave India relatively better placed.

 

“A more prolonged escalation, however, could push the Nifty below 24,500 levels. The larger macro concern is a renewed burst of inflation that delays rate cuts and crimps consumption as prices rise. While the government can initially shield households by absorbing part of the crude shock on oil marketing companies' (OMC) balance-sheets and its own fisc, that in turn constrains budget headroom and risks crowding out domestic capex, where the adjustment is likely to be felt most,” said Venugopal Garre, managing director at Bernstein, in a coauthored note with Nikhil Arela.

 

At the bourses, meanwhile, the Nifty 50 index hit an intra-day low of 24,645.1 before recovering some losses as investors bought stocks at lower levels. 

 

Tech view

 

Technical indicators, too, suggest a limited downside for the markets from here on, analysts said, unless the war prolongs. A breakdown below the psychological level of 25,000 on the Nifty 50 index, analysts suggest, level may intensify selling pressure and drag the index toward 24,800–24,600 levels with 25,400 levels remaning in play.

 

On the upside, the 25,350–25,500 band now acts as a key resistance area for the Nifty, according to Ponmudi R, CEO of Enrich Money, a SEBI-registered online trading and wealth tech firm, as earlier support has turned into a barrier.

   

"Momentum indicators remain weak, with the relative strength indicator (RSI) hovering around 40, signaling fading strength, while MACD sell signals continue to reflect prevailing bearish momentum. Overall, the downside bias remains intact unless the index posts a decisive close above the 25,300–25,400 region," he said.

 

For Shrikant Chouhan, head equity research, at Kotak Securities, the immediate level to watch for the Nifty 50 index is 25,000. "A sustained move below this mark could increase pressure, as the next significant support is placed in the 24,500–24,350 zone," he said.