10% stock market crash ahead? What Nifty’s bear case scenario looks like

Stock market news: A host of brokerages have cut their Nifty targets as the prospects of the US-Iran war extending for a couple of months have increased, despite the US President Donald Trump suggesting otherwise. The bear case targets of at least two brokerages suggest Nifty has potential to crash another 10 per cent from here as the war in West Asia pose see upto 10-15 per cent risk to consensus earnings estimates for FY27 in case oil prices remain elevated at current levels.

The fresh to join the bandwagon is Emkay Global which warned that Nifty could crash to 21,000 if oil prices remained at $100 for 3-4 months, implying a further 10 per cent correction. The domestic brokerage said India’s growth, macro stability, and earnings are at risk, with LPG shortage threatening serious disruption of daily life. 

“We also fear second-order challenges from a global growth-inflation shock. This scenario is not priced in, and we see 10 per cent further downside risk for the Nifty in the absence of a détente. The correction would be temporary,” it said.

This comes a day after Nomura suggested a December 2026 Nifty target in the range of 21,000-29,100 with its bull case assuming an immediate de-escalation of geopolitical tensions.

For now, it has cut its base December 2026 Nifty target at 24,900 from 29,300 earlier, assuming a 7.5 per cent reduction in consensus earnings estimates with PE multiple at 18.5 times against 21 times earlier. 

The brokerage said a similarly steep correction was seen twice in the past decade, first during the Covid-19 pandemic in 2020. The second instance was at the onset of the Russia-Ukraine conflict in 2022.

“The market valuations in terms of P/E or spread over bond yields are at the low end of the valuation band that prevailed over the past four years. We think an additional 5 per cent correction (similar to the correction during the Russia-Ukraine war) is a distinct possibility in the near term, with small- and mid-cap stocks at relatively greater risk,” it said.
 
Citi, meanwhile, reportedly cut its target to 27,000 from 28,500, still implying a 17 per cent upside. Citi estimated that three months of supply ​disruptions could shave off 20-30 basis points off India’s growth in fiscal year 2027, raise inflation by 50-75 bps, widen the ​fiscal deficit by 10 bps and add $25 billion to the current account deficit, Reuters reported.

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Emkay said no sector is immune, but it sees technology, pharma, metals, and Power (surging power demand) as relatively protected and OMCs, utilities, airlines, and autos more exposed. “Some of this has already been priced in, but we think banks/NBFCs have been unfairly punished and see an entry opportunity, even before oil prices normalize,” it said.

Nomura said through this phase of market correction, it expects utilities, coal, oil producers, healthcare, pharma, staples, and telecom to outperform. 

“Fundamentally, we are constructive on these sectors, except for healthcare services and staples where we find valuations demanding. We recommend a bottom-up approach with a greater focus on valuation – and not just the narrative,” it said.