Monthly Market Outlook April 2026 By Prateek Agrawal

War Is Devastating But War Brings Opportunities Also

• Arbitrage opportunities may arise: Price arbitrage as trade route change and
• Availability: Many Companies/Economies may not be able to manufacture given the fuel shortage

With Middle-East war, India is getting singled out, amongst the larger economies, as a collateral damage as a consequence of energy situation in Middle East. Things were turning to look better post 3Q earnings and corporate commentary was also improving. However, this war has now again brought uncertainty to the fore with concerns for FY27 earnings estimates (more so for broader markets than Nifty 50). February was a month when the AI impact was felt on software services companies, March saw the impact of the war. Issue can be de-constructed into issues of availability and issue of price. Higher oil prices are impacting our current account and reserves to the extent of around USD6bn per month. This may be manageable for a limited period given our reserves. The issue of inflation also may be handled by letting refining companies absorb losses for some time (potentially with government support). However issue of availability can adversely impact industries and economy. Oil is easy to source. Gas may prove to be more difficult. On availability, it seems that Indian manufacturers are at an advantage vs many other manufacturing nations and may gain from better market access, if this continues.

While India is amongst the worst hit economies, we may be able to cope, though risks remain. Oil and gas imports account for 2.8% of GDP. Mideast accounts for 50% of this. However, reserves of around 70 days, good forex cover of over 7 months, power sector dependence on domestic coal (rather than oil), and ability to refine difficult crudes including from Russia may provide some cushion to the economy. Diversified mix of fuels and sourcing base may help limit economic impact vs many other competing textile/leather/autoparts manufacturing nations such as Pakistan, Sri-Lanka, Thailand, Egypt and Bangladesh where fuel control measures are already in place, raising anxiety on order fulfilment.

Three indicators not shown: Oil & gas imports from the Middle East, Gulf Remittances, external government debt. ^Estimate

Issue of high oil and gas prices and their availability is impacting the sentiment at the moment. This issue has emerged suddenly and while today analysts are projecting higher and higher oil prices, we think this issue could resolve suddenly as well, though uncertainty remains. We think that today the world may be producing more oil than it needs. Venezuelan oil and Russian oil is in the market. If the war ends/ strait of Hurmuz opens, more of Iranian oil could also be on the market (vs going to only China). Middle east has already increased production and may need to produce more to fund for disruption and damages. For a while, it would seem that there is more oil being produced than required and could cause volatility, including a possible decline in the oil price.  Damage to the infrastructure would need time to be repaired but others may be able to step into temporary disruptions. Already, US has said ceasefire for 5 days while its credibility is being tested.

Moreover, this is a period of high disruption, middle east not exporting refined material leading to China also suspending export of refined products, helium production getting impacted which in turn is impacting the semiconductor supply chain, disruption in Urea production on lower gas availability coupled with export restrictions by China could potentially impact food production. India has been able to source gas for urea production, our electricity depends on coal and hence our metal production remains relatively competitive. Chemical prices have moved up sharply. Some chemicals do not need oil or can be made from other sources such as agri-waste, ethanol/ coal. We have been able to source crude and refineries are working at fully capacity. While overall we get negatively impacted on account of higher oil prices, we think there could be relative beneficiaries from a neutral country like ours.

*Data for Pakistan as of 2023. ^Data for India as of 2025

Q4 result season and valuations

The disruption on account of Mideast crisis and higher oil and gas prices has come at peak of our busy season, leading to disruptions and higher prices into the entire chain. This phenomenon could mean that Q4 results are better than expected. Companies may be able to sell off inventories at higher prices and, ex of fuel disruptions reported for a small fraction of manufacturers, manufacturing continues using the inventories of a few days that every organization keeps. Services spaces could see some disruption as for example, contract pricing stays but travel becomes more expensive or not possible.

Accenture has declared results pointing to a business as usual quarter for software. At lower prices after the February fall, we think the IT results and outlook shared may be viewed positively. However, we continue to believe that software valuations may remain under pressure from a very strong AI narrative. Also, while valuations in Indian context appear reasonable, they still look high when compared with global peers with similar growth prospects. Many of our funds are not exposed to software at all and overall we have reduced exposure to this space.

Banks have seen a sharp drop on heavy FPI selling and may offer relative value. Many banks are trading at P/BV levels below their sustainable ROAs which may present potential opportunities, subject to risks. Our house was historically very low on banks and financials but we have increased exposure there.

We think while today there are a lot of concerns on inflation, higher interest rates, production disruption, availability of gas, INR depreciation, stress on forex, etc, these are all emanating from Mideast crisis and closure of St of Hormuz. As we have discussed, India may be able to withstand the adversity for some time, though uncertainties persist. Many other countries are hurting more than us and most are hurting. Since the source of stress is one and so many are hurting, there is a possibility of resolution over time on all round efforts and the next period proves to be good for investors.

We think if the disruption is not resolved then spaces like India produced commodities like metals, food, chemicals, etc may do relatively better benefitting from better prices. EVs and Renewables may benefit from higher investor and policy focus. However, if the crisis resolves, then growth themes like Capital markets, EMS, NBFCs, New tech (including consumer tech and fintech), electrical and cap goods, EVs, Renewables, etc may perform well, subject to market conditions. EVs and renewables may continue to see interest either ways as oil caused disruption weigh on minds of consumers, investors and policy makers as could defense. Banks also may have potential to recover and would be of interest to value-oriented investors. Larger construction plays may benefit from more contracts.

It continues to be time for alpha

We think markets are at levels where opportunities may emerge across sectors, though risks remain. Many sectors aim to offer potential upsides. Large index spaces like banks and software also offer some valuation comfort. We think chances of market sustaining its level and delivering better than earnings growth outcomes are high subject to prevailing risks and uncertainties.

We think the construct offers great chance for alpha. If the situation resolves, we may see an appreciation of the INR. FPIs which were strong buyers in Feb (as past issues such as trade deals got resolved) but turned sellers in March on the Mideast crisis, higher oil prices and weak INR, could return depending on evolving conditions. As Indian market comes back into focus on Anti AI trade, sustained earnings growth, slew of trade deals and ultimately a stable currency, high growth spaces may drive outcomes.

Last two months have been kind to an earnings growth focused player like us. Software offered low earnings growth and we were not exposed much. This helped some of our funds in Feb when AI resulted in a carnage in the space. In March, lower exposure to banking and financials helped as the space saw strong FPI selling. At the same time, positive government policy making in spaces like renewables and batteries helped.

Risk to the thesis is sustained stress on forex on various counts including Mideast crisis and us getting into a forex related issue, a low probability event to our mind.

Thank You
Happy Investing
May the Good Times Continue

Source: MCX India, Bloomberg, MOFSL, RBI, NSE Indices, MOAMC Internal. Data as on Feb’26.

Disclaimer:

This note/document/video has been issued based on internal data, publicly available information, and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fact. These statements are based on current market conditions, which may change, and past performance is not indicative of future results. The Stocks/Sectors mentioned herein are for explaining the concept and shall not be construed as investment advice to any party. The information/data herein alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. It should not be construed as investment advice to any party. The views expressed above are those of the MD and CEO of the AMC and are based on current market conditions and informational purposes only and should not be construed as investment advice. The term ‘alpha’ is used in the context of broader market opportunities for differentiated performance through stock selection. It does not indicate or guarantee outperformance by any specific mutual fund scheme. All opinions, figures, estimates, and data included in this article are as of the date of publication. The note does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses, and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements. This material does not compare or promote any specific investment product or strategy over others. References to investor flows or macroeconomic factors are for informational purposes only and should not be construed as market predictions or investment recommendations. Past performance may or may not be sustained in the future. Readers shall be fully responsible/liable for any decision taken based on this article.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.