Know The Ripple Effect of Conflict Before Its Too Late

Market Update - Tuesday, 7 Apr

For the third day in a row, the Nifty has come back up from the red. While it is not 100% certain, the behavior of the market suggests that the market is not willing to go down again unless really catastrophic news comes from overseas.

Another background story that is developing is about the petrodollar. In the 70s, the US offered protection to the Middle East and stated that oil would not be sold in any currency except the US dollar. That is how the petrodollar came about, where Middle East countries sold all oil in dollars.

• Looking at the market charts, for the third time since the Iran war started, Nifty has closed at a two-day high position, which is the first flag for a potential rally. A trend line break seems to have happened here.

• The 23,000 level has been regained again, which is good news. Short-term moves are looking positive.

• A similar trajectory is seen on Nifty Jr., which is up 0.46%, and the short-term momentum trend is positive.

• Mid-caps are also up three days in a row, although today's move was barely flat at 0.1%.

• Small caps are marginally up at 0.13%. The short-term move is positive here, and levels are the same as they were almost a month back. Net-net over the last one month, small caps have not dropped.

• Bank Nifty is up 0.2%, which is not very strong but is gradually building up with a fourth green candle.

• Gold is flattish at 0.42% and is just at a breathing time right now.

• Oil is something that everybody is watching. Every time Brent crude goes beyond 111 or 112, there is some sort of a sell-off. Today it almost reached 111.8 and has come off to 108.8. Selling comes around at this price, and only a major escalation would cause it to cross 112 toward 150.

Other Market Triggers

• The Nifty heat map is largely green with no major reds. Some pharma stocks lost small amounts, but IT stocks are going up very nicely.

• Bharti Airtel is also doing really well in the Nifty. In the Next Nifty, there were some losses in stocks that were running hard yesterday.

• DMart has been running three days in a row. Bank of Baroda and Union Bank were also running yesterday.

• Vedanta, Jindal Steel, and Hindustan Zinc were among the metal stocks moving up today. Overall, it was a very nice mixed bag for the Nifty Next 50.

• In the movers of the day, Titagarh Rail Systems zoomed 9% as they received a 610 crore project. Titagarh is moving up nearly 700 rupees on that news.

• Jubilant FoodWorks dropped more than 10% on a big miss on quarter four updates.

U.S. Market Updates

• In the previous session of the US markets, Booking Holdings and Starbucks were up 5%, while GE Aerospace and Lockheed Martin defense stocks were up along with Texas Instruments at 2.3%.

• Markets overall were up 0.4% to 0.6%. Some of these stocks could be part of the Weekend Investing US stock strategy, though these are not recommendations.

• The NASDAQ 100 heat map looks quite good with Apple, Google, Amazon, Walmart, MU, and Cisco gaining, while Tesla and ASML lost ground.

What to watch next ?

• There has been a very nice three-day run. There was a three-day run previously as well, so this is not to say it is unbeatable, but since the second week of March, the market is still at the same place.

• Almost more than three weeks have gone by and the markets net-net have not given up any position on the Nifty. That is very positive given that the last three weeks have seen substantial deterioration in terms of geopolitics.

• From that point of view, it does seem like Nifty is gathering some momentum and finding its feet. Perhaps we have seen the bottom of this rally, though nobody will ever know for sure.

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What To Read This Week ?

Global Energy Crisis: The Ripple Effect of Conflict

The geopolitical landscape has shifted dramatically, and with it, the global economy. Recent data presented by Charlie Bilello highlights a stark reality: since the onset of the Iran conflict, energy and raw material prices have surged to levels that demand our immediate attention.

From heating homes in the West to fueling industries in the East, the "war premium" is now being felt across every sector.

The Price of Conflict: A Deep Dive into the Data

The rise in prices isn't just a minor fluctuation; it is a massive upward trend across the entire energy and commodity spectrum. Western nations are feeling the brunt of heating costs, while emerging economies like ours are grappling with agricultural and industrial input spikes.

Energy & Fuel Surges

• Heating Oil & European Natural Gas: Leading the pack with a staggering 70% increase.

• Brent Crude: A critical benchmark for our economy, up by 58%.

• Diesel & Gasoline (Petrol): These have climbed by 44% and 42% respectively, directly impacting logistics and daily commuting.

Industrial & Agricultural Impact

• Urea & Fertilizers: Urea has jumped 48%, while general fertilizer prices are up 29%. This poses a significant challenge for food security and agricultural inflation.

• Raw Materials: Sulfur (43%), Coal (21%), and Iron Ore are all trending upward, putting immense pressure on manufacturing margins.

• Commodities: Everyday essentials like Rice and Palm Oil are not immune, contributing to the rising cost of living.

The 180-Degree Flip: Inflation & Interest Rates

Until recently, the market sentiment for 2026 was optimistic, with many expecting two or three interest rate cuts in the US. However, this war-induced price spike has triggered a 180-degree flip in economic forecasts.

The narrative has shifted from "When will rates fall?" to "Will rates have to rise?" To curb the runaway inflation fueled by these raw material costs, central banks—including the Fed—may be forced to keep interest rates high or even hike them further. This liquidity crunch significantly increases the potential for a global recession.

Strategic Playbook: Protecting Your Portfolio

In an environment defined by High Inflation, High Interest Rates, and Recessionary Risks, passive investing may not be enough. Investors need to be proactive and disciplined.

• Asset Allocation: Now is the time to review your mix of equity, debt, and gold. Diversification is your primary shield against volatility.

• Flight to Quality: Focus on "Strongest of the Strong" stocks. Look for companies with high pricing power that can pass on increased raw material costs to consumers without losing market share.

• Sector Agility: Stay aligned with sectors that show resilience or benefit from high commodity prices, ensuring you rotate out of laggards and into leaders.

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