India Market Outlook: Sonam Srivastava on US-Iran Deal, AI Risks, and Sector Insights for 2026

Sonam Srivastava, Founder and Fund Manager at Wright Research PMS, shares her expert views on the Indian market’s potential trajectory amidst geopolitical developments, artificial intelligence concerns, and sector-specific opportunities. As investors worldwide watch the evolving US-Iran talks, Srivastava provides a nuanced perspective on potential market reliefs, risks, and strategic plays across various industries.

Relief Rally Expected with US-Iran Deal

Sonam Srivastava expects a relief rally in Indian markets if the US and Iran finalize an agreement soon. The optimism already pushed the Nifty index up by nearly 2% recently to 23,623 points. A confirmed deal could drive oil prices below $80 per barrel, significantly easing India’s inflation and current account deficit.

Lower crude oil prices are a key transmission channel for India’s economy, benefiting various sectors:

• Oil marketing companies
• Aviation
• Paints and tyres
• Consumption-driven stocks
• Banks, due to improved rate outlook and inflation expectations

However, Srivastava cautions that the current optimism is partly priced in and advises positioning for the rally but respecting headline risks, as delays or muted progress in the deal can lead to profit booking at higher levels.

AI: A Double-Edged Sword in Global Markets

An emerging concern in global markets is the risk of an AI-led sell-off. Nearly half of fund managers now view an AI bubble as a primary risk, signaling increased scrutiny. While over $500 billion is projected to invest annually in AI infrastructure by 2026-27, actual consumer revenue remains relatively modest at $12 billion in the US.

Srivastava highlights the complex dynamics where big tech firms and AI companies mutually fund each other, creating a fragile market sentiment. Yet, the AI narrative remains intact as major platforms continue to deliver solid earnings, shifting investor focus towards execution rather than perfection. India remains somewhat insulated due to fewer pure AI plays but is not immune to sentiment impacts from US market corrections.

Challenges Ahead for India in Upcoming Quarters

According to Srivastava, the forthcoming two quarters may serve as a breather rather than a crisis for India. The steep rise in crude oil prices from $67 last year to around $103 has raised inflation and moderated growth forecasts by the Reserve Bank of India (RBI).

Despite these concerns, some positive signs include better-than-expected March quarter earnings, record GST collections, and robust manufacturing activity. The principal worries stem from imported inflation and the fiscal burden on the government to subsidize fuel prices. Market movements might be sideways with selective stock actions until oil prices stabilize, which could then set the stage for a clearer uptrend.

FIIs and Earnings Growth: The Road to Market Recovery

Foreign Institutional Investors (FIIs) have pulled out significant amounts from Indian equities this year due to global factors like high US interest rates and West Asia uncertainties. However, Srivastava explains that a rebound in earnings growth is vital for their return.

Q4 FY26 results have lifted expectations for FY27, with Nifty earnings growth projected at over 17%. If India delivers on these growth figures amidst stable crude prices and rupee valuation, FIIs are likely to flow back rapidly, given their currently low exposure.

Sector-wise Investment Insights

Financial Stocks

Srivastava remains bullish on financial stocks due to a supportive RBI environment. The repo rate held steady at 5.25%, with new measures encouraging cheaper overseas deposits. This has reduced funding costs and improved banking margins. Credit growth is recovering alongside resilient asset quality, especially for well-capitalized large private banks and secured lending-focused NBFCs.

Telecom Sector

Telecom stocks appear attractive with an expected 15% tariff hike in Q2 FY27, potentially boosting industry revenues. Usage trends and pricing power among the three major players underpin growth prospects. The upcoming Jio Platforms IPO is also anticipated to stir sector interest. Bharti Airtel stands out with its strong cash flows and international operations.

Pharmaceuticals

The pharma sector offers a favorable risk-reward opportunity if investors are selective. Domestic pharma sales have seen steady double-digit growth, with the Nifty Pharma index underperforming the broader market, indicating potential value. While US patent drug duties present challenges, generics and biosimilars remain largely protected, especially benefiting companies focused on domestic markets, CDMO players, and those with US manufacturing facilities.

Energy Security and Infrastructure

India’s focus on strengthening domestic energy security is a compelling long-term story. The Strait of Hormuz crisis highlighted supply vulnerabilities, prompting diversification of crude sources from 20 to 40 countries and significant infrastructure expansion like the Mundra terminal for very large crude carriers.

Opportunities exist mainly in upstream oil producers, gas infrastructure, and renewable energy sectors aligned with India’s electrification goals. Conversely, oil marketing companies currently face margin pressures due to high crude prices.

Conclusion

Sonam Srivastava’s analysis suggests cautious optimism for Indian investors in 2026. While geopolitical factors like the US-Iran deal and AI market dynamics carry risks, selective sector investments in financials, telecom, pharma, and energy are positioned for growth. Monitoring crude oil prices and global earnings trends will be key to navigating the market landscape in the coming quarters.

Disclaimer: The views expressed are those of the expert and do not represent the opinions of any platform. Investors should consult certified financial advisors before making investment decisions.