A two-week pause in the Iran conflict has lifted Indian equities, and Nilesh Shah of Kotak Mahindra AMC counsels that a pause is not yet peace. Markets have been drifting for nearly two years while earnings grew quietly, and the real question is whether the world's oil lanes and diplomatic signals settle into something durable. Shah reads the moment as a stalemate that may serve global stability, and he asks investors to be selective, patient, and prepared to buy when others are still hesitating.
Iran Ceasefire Sparks Relief Rally, But Kotak's Nilesh Shah Says Markets' Worst May Not Be Over
A pause is not peace
Mark
Why does Shah call the rally expected but not a turning point?
Mimi
Because the ceasefire is only two weeks long. He says markets need sustained peace, not a pause, and points to Israel hitting Lebanon and Hormuz only partly open.
Luke
That's his read of the risks, though. Nothing here shows the ceasefire failing; it's a caution, not an event.
Mark
He says the conflict ends in a stalemate. How firm is that?
Mimi
He frames it as likely, with both sides able to claim victory. He also says he isn't a geopolitics expert.
Luke
Worth keeping in mind. It's a prediction from a fund manager, not confirmed outcome.
Mark
What's unusual about the valuation point?
Mimi
He says this wasn't a sharp derating like 2020. The Nifty has been flat for nearly two years while earnings grew in single digits, so the correction came through time.
Luke
He says valuations are more reasonable but not compelling. That's a judgment, and no specific multiples are given.
Mark
And the 6.5% growth figure?
Mimi
He ties it to oil in double digits, but says it still depends on actual prices and de-escalation lasting.
Luke
So it's conditional. The rate-cut view is likewise his expectation, not an RBI statement.
O Pulso
- A fragile two-week ceasefire has sparked a relief rally, but contradictory signals from Lebanon, Hormuz, and stalled negotiations keep the outcome in doubt.
- Indian stocks remain stuck in a long, flat correction, with valuations cheaper but not cheap enough to spark a Covid-style rebound.
- Supply chains and trade routes are still strained, and FY27 earnings guidance must be read with caution rather than hope.
- Oil futures in backwardation point to double-digit prices, easing fears of an energy-driven inflation spike and supporting roughly 6.5% growth.
- The RBI is expected to hold rates steady through the year, while investors are steered toward banks, consumption, cement, and select defence and tech names.
A two-week pause in the Iran conflict has lifted Indian equities, and Nilesh Shah of Kotak Mahindra AMC counsels that a pause is not yet peace. Markets have been drifting for nearly two years while earnings grew quietly, and the real question is whether the world's oil lanes and diplomatic signals settle into something durable. Shah reads the moment as a stalemate that may serve global stability, and he asks investors to be selective, patient, and prepared to buy when others are still hesitating.
Nilesh Shah, Managing Director of Kotak Mahindra AMC, is not ready to call the bottom. The two-week Iran ceasefire lifted Indian markets, and he calls that rally expected but not a turning point. A pause, he argues, is not peace. Israel is still striking Lebanon, Iran has not fully reopened the Strait of Hormuz, and Washington has rejected Tehran's ten-point proposal. Only sustained de-escalation without mixed signals will let markets settle.
He sees the conflict ending in a stalemate, with both sides claiming some victory. Washington and Jerusalem can point to degraded nuclear and missile capacity and open oil lanes, while Tehran keeps its regime and its toll on regional shipping. Shah admits he is not a geopolitics expert, but he suggests that no decisive outcome may be the safest path for the world.
On valuations, he says this correction is different from the sharp Covid crash of 2020. Instead of a sudden derating, the Nifty has stayed largely flat for nearly two years while earnings grew in single digits. That has made prices more reasonable, though not compelling enough for a broad rebound. He expects stock-specific gains unless foreign investors return as large buyers, and he warns that a quick return to normal in earnings and activity by mid-FY27 is unlikely.
Oil offers some comfort. Futures point to double-digit prices rather than triple digits, which he believes can support growth near 6.5% in FY27. He expects no rate cut this year. For investment, he favours banks with strong deposits, hotels and hospitals, cement, and select mid-cap IT firms. He also sees a multi-year defence tailwind for indigenous companies with advanced technology. His advice is to stay selective, hold cash for opportunities, and invest contrarian rather than chasing momentum.
Nilesh Shah, Managing Director of Kotak Mahindra AMC, does not think the worst is behind Indian markets, even with a two-week ceasefire in the Iran conflict now in place. Speaking to Moneycontrol, he called the relief rally that followed the pause expected, and said it should not be mistaken for a turning point.
His argument is that direction from here depends on what happens on the ground. A pause is not peace, he said, and only sustained de-escalation would let markets settle. He pointed to several things that still look unresolved: Israel is already striking Lebanon, Iran is not fully opening the Strait of Hormuz, and the United States has dismissed Iran's 10-point proposal. For stability, he said, the ceasefire has to hold without contradictory signals.
Asked who is winning, Shah said he expects a stalemate. The US and Israel, in his telling, can credibly claim victory: they have degraded Iran's nuclear capability and ballistic missile infrastructure, and they have kept Hormuz open to global oil flows. Iran will claim its own win by pointing to a regime that remains intact and to the toll it continues to extract on shipping through the region. No side got a decisive result, which he said may be the best outcome for global stability. He added that he is not a geopolitics expert.
On valuations, Shah said concerns remain even after the correction. This episode is unlike the sharp Covid crash of 2020, when prices were derated meaningfully. What India has had instead is a long correction in time: the Nifty has been largely flat for nearly two years while corporate earnings kept growing, though only in single digits. That has made valuations more reasonable, he said, but not compelling enough to deliver a Covid-style rebound. He expects stock-specific moves rather than a strong broad-based rally unless foreign portfolio investors turn big buyers.
He also cautioned against assuming a quick return to normal in earnings and economic activity by the second quarter of FY27. Supply chain disruptions are not fully resolved, the Strait of Hormuz is only partly open, and the cost of rerouting global trade remains elevated. He said management guidance for FY27 needs to be heard carefully.
On oil, he was more reassuring. Futures are in backwardation and point to double-digit prices rather than triple digits, so he is comfortable ruling out near-term energy-driven inflation spikes. That, he said, should support GDP growth of around 6.5% in FY27, though the path still depends on actual oil prices and whether de-escalation lasts. He does not expect a rate cut this year, and sees the RBI staying in a long pause, given that growth is stabilising and inflation risks are not fully gone.
Shah expects indigenous defence spending to rise substantially. He cited independent defence commentator Major Gaurav Arya (retd), who has pointed to potential procurement of about $500 billion over the next decade, largely for indigenous platforms. Shah called this a multi-year structural tailwind and said companies with futuristic technology are likely to do better than traditional defence names.
The sectors he favours are BFSI, especially banks with strong deposit franchises and asset quality; hotels and hospitals, on domestic consumption and medical tourism; cement, on capex and infrastructure spending; and select mid-cap IT firms with strong deal wins and niche capabilities. His summary: markets have breathing space, but its durability rests on genuine peace, stable oil and delivery on earnings. Stay selective, stay invested in quality, hold cash for opportunistic buying, and invest contra, not just momentum. The things to watch are whether the ceasefire holds, whether Hormuz fully reopens, and where oil prices settle.
Citações Notáveis
I do not believe the worst is behind us for the markets.— Nilesh Shah, MD, Kotak Mahindra AMC
Quer a matéria completa?
Leia o original em Moneycontrol ↗
War & Conflict