Middle East Crisis: Top sectors to chase & avoid in your portfolio as Iran shockwaves batter D-Street

Key Sectors in Focus Amid Middle East Tensions: It was a second straight Monday mayhem for Dalal Street participants as disruptions emanating from the ongoing Middle East crisis continued to create ripples across global markets. After a major gap-down start to the day, the Sensex and the Nifty50 tumbled more than 3.0 per cent each for the first time in 11 months, as investors fretted over soaring crude oil prices. India meets more than four-fifths of its oil demand through imports, and any major spikes in oil rates hurt the Indian economy by inflating the import bill while battering the currency and causing inflationary pressure.

Share Market Crash | Nifty Bank's worst fall in 21 months

The Sensex plunged as much as 2,494.4 points, or 3.2 per cent, to hit 76,424.6 on the downside, while the Nifty50 slumped to as low as 23,697.8, shedding 752.7 points, or 3.1 per cent, to 24,450.5.

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The Nifty Bank -- whose 14 constituents include banking heavyweights SBI and HDFC Bank -- spiralled 2,512.7 points, or 4.3 per cent, to 55,270.6, marking its worst fall since June 4, 2024.

What caused the market to fall?

Analysts say crude oil, seen posing pressure on the country's economy while raising its import costs, battered investor sentiment. Brent crude futures -- one of the global oil price benchmarks -- surged 28.9 per cent to $119.5 a barrel in intraday trade before somewhat cooling down.

The benchmark's spike was the highest since July 2022.

The contract was last seen trading at $107.6 a barrel.

Foreign brokerage BofA wrote, in its India strategy note, that geopolitical volatility is keeping markets uncertain, stating that Nifty50 EPS growth may be around 11 per cent for FY27, lower than the market estimate of 16 per cent.

According to the brokerage, the recent decline is not due to weak fundamentals but largely on account of foreign institutional investor (FII) outflows and macroeconomic uncertainty.

What if Iran-Israel conflict drags on?

If the conflict is resolved quickly, markets could see a sharp relief rally, but if it drags on, further correction may occur in some sectors, according to BofA.

What to focus on amid choppy waters on Dalal Street?

BofA prefers the defence space over engineering, procurement and construction (EPC) contractors.

Among defensive sectors, the brokerage prefers telecom, hospital and pharmaceutical names.

Capex and infrastructure theme

Within the capex and infrastructure theme, BofA prefers coal, wires and cables, and data centre themes, over railways, ports and logistics, industrials, infrastructure, EMS, shipbuilding and cement.

Commodity sector strategy

The brokerage prefers upstream energy and non-ferrous metals over downstream energy and steel.

Consumer space

Within the discretionary theme, BofA's focus is on quick service restaurants (QSR), quick commerce, jewellers and two-wheelers over airlines, airports, hotels, durables, real estate, alcoholic beverages, auto ancillaries and tyres.

Financial services

The brokerage prefers exchanges over asset management companies and other market-linked plays, and considers commercial banks better positioned than NBFCs, insurance and housing finance.