Could rising oil prices and geopolitical tension change the outlook for the Indian stock market? According to a latest report by global brokerage firm Nomura, oil is a key risk. The brokerage has revised its December 2026 target for the Nifty to 24,900, significantly lower than its earlier estimate of 29,300.
According to the brokerage report, the revision reflects on the growing concerns about elevated crude oil prices, geopolitical tension and their possible impact on corporate earnings and economic growth.
Let’s take a look at what is the brokerage say on this and its outlook –
Lower target due to earnings risk
As per the brokerage report, the new target for the Nifty index assumes a weaker earnings outlook. The firm has reset its December 2026 target to 24,900, compared with its earlier estimate of 29,300.
The brokerage noted that “we see up to 10-15% risk to consensus earnings estimates for FY27F in case oil prices remain elevated at current levels.”
According to the report, the revised estimate also assumes a 7.5% reduction in consensus earnings forecasts. At the same time, the brokerage has lowered its valuation assumption. It now expects the index to trade at a price-to-earnings (P/E) multiple of 18.5 times, compared with 21 times earlier.
Even with the downgrade, the brokerage believes the market could move within a wide range depending on global developments. The report stated that “we see Dec-2026 Nifty target in the range of 21,000–29,100.”
Oil prices emerge as a major concern
One of the key risks highlighted in the report is the sharp rise in crude oil prices. According to the brokerage report, Brent crude oil has moved above $100 per barrel due to disruptions in shipping routes near the Strait of Hormuz.
The report pointed out that “the last time oil prices surged past USD100 per barrel was in 2022 following the start of the Russia-Ukraine conflict.”
However, the brokerage believes the current situation could be even more concerning. According to the report, “the Strait of Hormuz accounts for 20-25% of global trade in oil and liquefied natural gas.”
Why this matters for India
The brokerage report also highlighted India’s strong dependence on imported energy. According to the report, India imports nearly 90% of its crude oil requirements.
A large portion of these imports moves through the Strait of Hormuz. The brokerage noted that “the Strait of Hormuz accounts for 43% and 63% of India’s crude oil and LNG imports.”
Because of this reliance, any disruption in the region could affect industrial activity and economic growth. The report stated that “a sustainably higher oil and gas price environment will adversely impact a fledgling growth recovery, drive inflation higher and strain external balance.”
The brokerage also explained that when oil prices rise sharply, the impact is initially absorbed by oil companies and the government.
Possibility of further market correction
According to the brokerage report, the Indian stock market has already seen a sharp decline recently. The Nifty index has corrected by about 8% over the past two weeks.
Looking ahead, the brokerage believes further downside cannot be ruled out in the near term. According to the report, “an additional 5% correction is a distinct possibility in the near term.”
The report also pointed that small-cap and mid-cap stocks may face relatively higher risk if markets continue to remain volatile.
Long-term view remains constructive
The brokerage believes market corrections could create opportunities for investors with a longer investment horizon. According to the report, “a correction beyond 5% from current levels should present a buying opportunity from a long-term perspective.”
The brokerage added that investors should focus more on company fundamentals and valuations rather than short-term market narratives.
According to the report, sectors such as utilities, coal, oil producers, pharmaceuticals, healthcare, telecom and consumer staples could perform relatively better during periods of market volatility.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.