Indian financial markets are assessing the potential ripple effects of recent US military action in Venezuela, with analysts divided on whether the event will trigger immediate volatility or eventually serve as a tailwind by pushing down global crude oil prices.
Market Experts Offer Diverging Views on Immediate Impact
Ashish Gupta, Chief Investment Officer at Axis Mutual Fund, believes the operation in the oil-rich South American nation should drive crude prices lower over time, which would be positive for India. He does not, however, anticipate a sharp, knee-jerk reaction when trading opens on Monday. "Markets have not reacted significantly to geopolitical events in Europe or West Asia in the past few years, and I don't expect one after the Venezuela takeover either," Gupta stated. He emphasized that domestic fundamentals like corporate earnings growth and fiscal prudence would continue to guide Indian equities.
In contrast, Madan Sabnavis, Chief Economist at Bank of Baroda, foresees a potential 5-10% surge in oil prices immediately following the attack, which could trigger a negative reaction in markets. Meanwhile, Nilesh Shah of Kotak Mahindra Mutual Fund warned that market volatility could increase, citing the difficulty in gauging the secondary impact of such an unprecedented event.
Oil Dynamics and India's Vulnerability
The stakes are high for India, which imports approximately 85% of its annual crude oil consumption. Data from the Petroleum Planning & Analysis Cell (PPAC) shows the country imported 243.2 million metric tonnes worth $137.2 billion in FY25. For FY26 up to November, imports stood at 163.4 million metric tonnes costing $80.9 billion.
Venezuela holds the world's largest proven oil reserves at 303 billion barrels, surpassing Saudi Arabia's 267 billion. However, due to existing US sanctions, India does not currently purchase crude from Venezuela. Harshraj Aggarwal of Yes Securities noted that while there is no direct impact, global crude prices and volatility could still be affected, even though Venezuela contributes only about 1% to global supply. "If the US manages to bring down crude oil prices by taking over Venezuela's production, it could benefit India," he explained.
Brent crude prices fell over 20% in the past year, from $76-78 per barrel in January 2025 to $60-61 by year-end.
Domestic Fundamentals and Market Trajectory
Indian markets entered 2026 on a strong note. On Friday, 2 January, the Nifty 50 settled at a record 26,328.55, up 0.7%, while the Sensex ended 0.7% higher at 85,762.01, nearing its all-time closing high of 85,836.12 from 26 September.
This recovery follows a turbulent period where the Nifty 50 fell 17% from its September 2024 peak to a low in April 2025, before rebounding 21%, largely propelled by ₹7.88 trillion of buying by domestic institutional investors. Despite this, Indian equities underperformed emerging market peers like China and South Korea in 2025, hampered by slower earnings growth and record selling by foreign portfolio investors (FPIs), who offloaded ₹2.4 trillion in equities.
Earnings prospects are improving. After September quarter results, consensus earnings estimates for the top 200 companies were raised by 0.6% for FY26 and 0.4% for FY27, implying an annual growth rate of 13.3% over FY25-27.
Market veterans like Nirmal Jain of IIFL Group and Mahesh Patil of Aditya Birla Sun Life AMC expect a gradual correction in oil if Venezuela's production comes under US control, strengthening the market breakout. Jain highlighted that lower oil, combined with domestic factors like GST cuts, income tax reductions, and benign interest rates, could be a significant tailwind.
Options trading data suggests a positive bias. Heavy selling of weekly put options at the 26,250 and 26,350 levels on Friday indicates traders expect markets to rise or remain stable. Data for Tuesday's expiry shows 167 put options were sold for every 100 call options sold, reflecting heightened bullish sentiment.
