Buy dips or sell rallies? Analysts' strategy amid West Asia crisis, Q1 results

Markets recovered partially from the near 1,700-point fall (Sensex) on Wednesday with the 30-share index rising around 700-points intraday on Thursday.

 

The volatility in the last two sessions has been triggered by fresh tensions in West Asia, with President Donald Trump threatening to unleash more military strikes against Iran.

 

The developments also triggered a spike in crude oil prices with Brent crossing the $80 a barrel (bbl) mark and WTI crude inching close to the $76 levels on Wednesday. Both, however, cooled of a tad on Thursday.

 

The recovery seen in the Indian stock markets on Thursday, analysts said, was more on account of value buying at lower levels, but advise investors stay cautious as geopolitical developments and corporate results for the April – June 2026 quarter (Q1FY27) back home is likely to keep markets volatile. 

 

 

The short-term market structure, said Shrikant Chouhan, head equity research at Kotak Securities, has turned negative. Selling on rallies, he believes, would be the preferred strategy for day traders. Immediate resistance, according to his analysis, is placed at 24,050 (Nifty) / 77,100 (Sensex) and 24,150/77,400.

 

“As long as the market trades below these levels, the negative sentiment is expected to continue. On the downside, the Nifty is likely to retest its 50-day Simple Moving Average (SMA), placed near 23,800/76,000. A sustained move below this level could extend the correction towards 23,600/75,800. We also recommend reducing weak long positions on any pullback towards the 24,100–24,200 zone,” Chouhan said.

 

Conversely, if the index moves above 24,050 / 77,100, a pullback rally towards the 24,150 –24,200 / 77,400–77,500 zone cannot be ruled out, he added.

 

​Worries overdone?

 

That said, there are indications that things may not deteriorate as feared. First, Brent at $80 is not a problem, said VK Vijayakumar, chief investment strategist at Geojit Investments, as it will not create a balance of payment (BoP) crisis.

 

The crisis, according to him, will reemerge only if the fresh round of (West Asia) tensions lead to the closure of the Strait of Hormuz again and consequently crude (Brent) spiking above $ 100.

 

"The present scenario do not reflect such a pessimistic scenario. September crude is trading at $76, which means the market doesn’t believe that the situation will aggravate. Globally, markets haven’t panicked. But the scenario needs to be watched closely," he said.

 

Another important trend is that the trend of FIIs turning buyers i​n Indian equities continues. During the last four trading days, FIIs have been buyers in India, buying equity for Rs 3,954 crore in the cash market in the last four days (till Wednesday).  

 

"This trend may continue if crude remains stable. Large-caps generally, and in financials and automobiles in particular, are likely to remain resilient," Vijayakumar said.

 

Even though the West Asia tensions can keep the markets choppy in the near-term, the negative sentiment, according to G Chokkalingam, founder and head of research at Equinomics Research, will be cushioned by supportive macros back home.

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Markets, he believes, expect President Trump to make a U-turn on his latest West Asia stand once again as he has done that several times earlier.

 

“Monsoon has picked up back home, which is a good sign for the economy and markets. West Asia war impact on Q1FY27 corporate earnings has mostly been factored in. While the markets can be choppy in the immediate term, I expect them to move up around 5 per cent in the next 3 months on supportive macros back home, provided the West Asia developments do not escalate into a full-blown war again,” he said.