What's expected if a deal happens?
A broad-based rally across sectors and stocks is possible as geopolitical risk premiums unwind and investor sentiment improves.
๐ In the initial phase, the market could witness a strong 2โ3 week relief rally, with even underperforming and beaten-down stocks participating.
๐ After this phase, the market is likely to differentiate between winners and laggards again. That could provide a genuine opportunity to rotate capital from laggard stocks into emerging leaders with stronger earnings visibility, relative strength, and institutional participation.
๐ This time, the probability of a temporary deal between the US and Iran appears higher.
๐ Brent crude is trading around $86, and the market seems to be pricing in a potential diplomatic resolution.
๐ The Nifty is currently trading at around 20.2x P/E, compared to approximately 22.2x P/E before the escalation of US-Iran tensions, when the index was near 25,500โ25,600.
๐ If the Strait of Hormuz remains open or tensions ease further, risk sentiment could improve significantly, creating room for a strong relief rally in Indian equities.
Market takeaway: A de-escalation scenario could support lower oil prices, improve global risk appetite, and potentially help Nifty move back toward its pre-conflict valuation levels.