810
9 days ago
Three segments quietly winning amid war, oil shocks, and the market bloodbath
Summary
The escalation of the West Asia conflict, resulting in the assassination of Iran’s supreme leader, the choking of the Strait of Hormuz, and Iran’s retaliation on neighbouring countries, has triggered the kind of macro shock markets dread.
Nearly 20% of global oil flows through the Strait, and disruptions have already pushed crude sharply higher to $87 a barrel and rattled global supply chains.
For India, the implications are particularly stark. The country imports almost 90% of its crude oil requirements, and about half of those imports transit through Hormuz. India’s crude buffer stands at only about a month, well below the 6-8 months for China, Japan, and Korea.
While there are reports claiming that Indian tankers are allowed through Hormuz, and that Russian oil imports have received a free pass for a month, markets are spooked. And reasonably so.
Higher crude means higher landed inflation, a wider current account deficit, and pressure on the rupee – all headwinds for corporate earnings, which had only just started staging a recovery. And markets have reacted accordingly – Nifty 50 index dropped almost 3% last week, matching the declines seen in the midcap and smallcap spaces.
However, markets are never one-dimensional. Even amid the bloodbath, a handful of stocks quietly marched higher. The reason? War creates scarcity and fear, which in turn, create pockets of opportunities. Let’s discuss three of such silver-lining segments.
The demand for defence rises during wars, with geopolitical shocks almost always bullish for defence companies. With governments expected to increase military spending and India’s defence capabilities already capturing the world’s attention during Operation Sindoor, some defence stocks have gained over 15% last week.
Bharat Electronics (BEL) is India’s flagship defence electronics manufacturer that dominates the space of radars and communication systems. Its order book of about ₹73,000 crore provides roughly three years of revenue visibility, even as operating margins have held steady around 30%. HAL’s fighter jets and helicopters are also back in focus with aerospace defence increasingly becoming the epicentre of geopolitical tensions. Bharat Dynamics, Paras Defence, and Zen Technologies are other major Defence names which have re-entered investors’ radar.
But risks remain. One, defence is only one of the verticals for Paras and Solar Industries. While Solar’s defence segment is margin-accretive and growing fast, that for Paras is barely breaking even. This is to say that investors need to look beyond headlines to identify “true” growing defence exposures.
Two, government procurement still drives a bulk of the business for the sector. Even Zen Technologies, which had derived almost half of its year-ago period’s revenues from exports, was entirely domestically driven in Q3FY26. This exposes them to working capital strain amid lumpy order-flows, even as debt can pile up quickly in these capital-intensive businesses.
Finally, execution will also need to be closely monitored, particularly for HAL whose revenue growth has not kept up with its order-book, and for Bharat Dynamics whose lumpy execution has resulted in significant volatility in growth and margins recently. While war-tailwinds lift the entire sector, long-term investors should maintain a lookout for strong fundamentals to support a sustained rally.
The biggest commodity surprise from the Iran war has not been oil or gas. It has been aluminium. Following attacks on its facilities, Qatar has halted production of aluminium. Given that it accounts for 8% of the world’s aluminium production, the rally in the metal has found new legs.
Aluminium had gained over 30% in two years as rising demand from clean energy and infrastructure, along with diverted demand from copper were met with tariffs and output caps in China, which accounts for 60% of the global aluminium production. But momentum had slowed down in 2026 with fading support from a weak US dollar, and expected improvement in scrap supply. Qatar’s supply constraints have turned this narrative on its head, and breathed new life into the metal.
UK aluminium futures have reached four-year highs this month. That’s where Nalco and Hindalco enter the picture. With integrated aluminium production from captive power plants to bauxite mining, and smelting, their stocks have jumped in tandem.
While recent fires at Hindalco’s Novelis facility will take until the June quarter for operational normalization, and limit how much Hindalco can capitalize on the tailwind, Nalco’s investors have jumped on the opportunity. Nalco appreciated almost 12% last week, against Hindalco’s much mellower 4% gain.
That said, rising energy costs – a crucial input for aluminium production - could offset some of the gains. Moreover, while Qatar’s supply disruption is expected to take at least a month to clear up, momentum in the metal may not sustain much longer. Incred Equities had expected aluminium to correct 20% this year. If that plays out, Nalco and Hindalco’s supernormal margin-expansion may become a thing of the past.
Not all winners from the crisis are tied directly to commodities or defence. Some are simply safe-yield stocks. When markets turn volatile, investors often rotate toward companies with strong dividend yields. Dividends are more or less assured returns, which turn particularly attractive when stock prices are volatile.
India VIX, the measure of India’s stock market volatility, touched 20 on Friday, spiking 45% in a week. On cue, stocks like Coal India and Vedanta, which have a history of distributing a significant portion of profits as dividends, held their ground even as the broader market tumbled lower.
In fact, the SBI Securities Dividend Yield Monitor listed out 14 large stocks (with market-cap of at least ₹10,000 crore) with dividend yields above 4% in FY25. For perspective, Nifty 50 index’s dividend yield stands at less than 1.3%. 10 of these 14 stocks held up better than the market amid last week’s turmoil.
However, high dividend yield does not guarantee better returns during market volatility. It is just one of the conditions, and fundamentals still supersede dividend yields. Take GAIL and Indraprastha Gas, for instance. The attacks on Qatar have held back the production of gas in the country.
India which imports 40% of its LNG from Qatar, will need to lean on spot LNG which is reportedly priced at double the rate contracted with Qatar. This spells significant margin-compression for gas distribution firms, and has sent these high dividend-yielding stocks 8% lower in a week.
Wars destroy value, but markets are rarely binary. The Iran conflict has clearly created headwinds for the global economy, particularly for oil-importing countries like India. Rising crude threatens inflation, fiscal balances, and corporate profitability.
Yet within the chaos, a few sectors are seeing clear tailwinds - Defence, aluminium producers, and high dividend-yielding stocks. Whether these gains sustain will depend on one variable above all - the duration of the conflict. If tensions ease quickly, these moves may fade just as fast.
But if the crisis lingers, or worse, expands, structural winners could become clearer. For now, markets appear to be hedging their bets.
For more such analysis, read Profit Pulse
Ananya Roy is the founder of Credibull Capital, a SEBI-registered investment adviser.
Disclosure: The author does not hold shares of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
Nearly 20% of global oil flows through the Strait, and disruptions have already pushed crude sharply higher to $87 a barrel and rattled global supply chains.
For India, the implications are particularly stark. The country imports almost 90% of its crude oil requirements, and about half of those imports transit through Hormuz. India’s crude buffer stands at only about a month, well below the 6-8 months for China, Japan, and Korea.
While there are reports claiming that Indian tankers are allowed through Hormuz, and that Russian oil imports have received a free pass for a month, markets are spooked. And reasonably so.
Higher crude means higher landed inflation, a wider current account deficit, and pressure on the rupee – all headwinds for corporate earnings, which had only just started staging a recovery. And markets have reacted accordingly – Nifty 50 index dropped almost 3% last week, matching the declines seen in the midcap and smallcap spaces.
However, markets are never one-dimensional. Even amid the bloodbath, a handful of stocks quietly marched higher. The reason? War creates scarcity and fear, which in turn, create pockets of opportunities. Let’s discuss three of such silver-lining segments.
The demand for defence rises during wars, with geopolitical shocks almost always bullish for defence companies. With governments expected to increase military spending and India’s defence capabilities already capturing the world’s attention during Operation Sindoor, some defence stocks have gained over 15% last week.
Bharat Electronics (BEL) is India’s flagship defence electronics manufacturer that dominates the space of radars and communication systems. Its order book of about ₹73,000 crore provides roughly three years of revenue visibility, even as operating margins have held steady around 30%. HAL’s fighter jets and helicopters are also back in focus with aerospace defence increasingly becoming the epicentre of geopolitical tensions. Bharat Dynamics, Paras Defence, and Zen Technologies are other major Defence names which have re-entered investors’ radar.
But risks remain. One, defence is only one of the verticals for Paras and Solar Industries. While Solar’s defence segment is margin-accretive and growing fast, that for Paras is barely breaking even. This is to say that investors need to look beyond headlines to identify “true” growing defence exposures.
Two, government procurement still drives a bulk of the business for the sector. Even Zen Technologies, which had derived almost half of its year-ago period’s revenues from exports, was entirely domestically driven in Q3FY26. This exposes them to working capital strain amid lumpy order-flows, even as debt can pile up quickly in these capital-intensive businesses.
Finally, execution will also need to be closely monitored, particularly for HAL whose revenue growth has not kept up with its order-book, and for Bharat Dynamics whose lumpy execution has resulted in significant volatility in growth and margins recently. While war-tailwinds lift the entire sector, long-term investors should maintain a lookout for strong fundamentals to support a sustained rally.
The biggest commodity surprise from the Iran war has not been oil or gas. It has been aluminium. Following attacks on its facilities, Qatar has halted production of aluminium. Given that it accounts for 8% of the world’s aluminium production, the rally in the metal has found new legs.
Aluminium had gained over 30% in two years as rising demand from clean energy and infrastructure, along with diverted demand from copper were met with tariffs and output caps in China, which accounts for 60% of the global aluminium production. But momentum had slowed down in 2026 with fading support from a weak US dollar, and expected improvement in scrap supply. Qatar’s supply constraints have turned this narrative on its head, and breathed new life into the metal.
UK aluminium futures have reached four-year highs this month. That’s where Nalco and Hindalco enter the picture. With integrated aluminium production from captive power plants to bauxite mining, and smelting, their stocks have jumped in tandem.
While recent fires at Hindalco’s Novelis facility will take until the June quarter for operational normalization, and limit how much Hindalco can capitalize on the tailwind, Nalco’s investors have jumped on the opportunity. Nalco appreciated almost 12% last week, against Hindalco’s much mellower 4% gain.
That said, rising energy costs – a crucial input for aluminium production - could offset some of the gains. Moreover, while Qatar’s supply disruption is expected to take at least a month to clear up, momentum in the metal may not sustain much longer. Incred Equities had expected aluminium to correct 20% this year. If that plays out, Nalco and Hindalco’s supernormal margin-expansion may become a thing of the past.
Not all winners from the crisis are tied directly to commodities or defence. Some are simply safe-yield stocks. When markets turn volatile, investors often rotate toward companies with strong dividend yields. Dividends are more or less assured returns, which turn particularly attractive when stock prices are volatile.
India VIX, the measure of India’s stock market volatility, touched 20 on Friday, spiking 45% in a week. On cue, stocks like Coal India and Vedanta, which have a history of distributing a significant portion of profits as dividends, held their ground even as the broader market tumbled lower.
In fact, the SBI Securities Dividend Yield Monitor listed out 14 large stocks (with market-cap of at least ₹10,000 crore) with dividend yields above 4% in FY25. For perspective, Nifty 50 index’s dividend yield stands at less than 1.3%. 10 of these 14 stocks held up better than the market amid last week’s turmoil.
However, high dividend yield does not guarantee better returns during market volatility. It is just one of the conditions, and fundamentals still supersede dividend yields. Take GAIL and Indraprastha Gas, for instance. The attacks on Qatar have held back the production of gas in the country.
India which imports 40% of its LNG from Qatar, will need to lean on spot LNG which is reportedly priced at double the rate contracted with Qatar. This spells significant margin-compression for gas distribution firms, and has sent these high dividend-yielding stocks 8% lower in a week.
Wars destroy value, but markets are rarely binary. The Iran conflict has clearly created headwinds for the global economy, particularly for oil-importing countries like India. Rising crude threatens inflation, fiscal balances, and corporate profitability.
Yet within the chaos, a few sectors are seeing clear tailwinds - Defence, aluminium producers, and high dividend-yielding stocks. Whether these gains sustain will depend on one variable above all - the duration of the conflict. If tensions ease quickly, these moves may fade just as fast.
But if the crisis lingers, or worse, expands, structural winners could become clearer. For now, markets appear to be hedging their bets.
For more such analysis, read Profit Pulse
Ananya Roy is the founder of Credibull Capital, a SEBI-registered investment adviser.
Disclosure: The author does not hold shares of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
AI Description
The article discusses how certain market segments are performing well despite global economic challenges. It highlights the impact of geopolitical tensions on oil prices and supply chains.