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Borsa Istanbul Strategy: Risks abound, but lucrative upside potential

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Borsa Istanbul Slides in March as Geopolitical Risks Weigh, Outlook Remains Volatile

Summary: Borsa Istanbul posted a weak performance in March amid rising geopolitical tensions and fading global risk appetite. The BIST-100 index fell 6.76% over the month, with banking stocks sharply underperforming. Markets now turn to April, where global developments and monetary policy expectations will drive direction.

Weak March Performance Driven by Risk-Off Sentiment

Borsa Istanbul came under pressure in March as global risk appetite deteriorated and geopolitical tensions intensified.

While the first half of the month saw occasional rebounds:

  • Gains remained short-lived and corrective
  • No sustained upward trend emerged

Overall, the index was weighed down by:

  • Heightened geopolitical uncertainty
  • Profit-taking activity

CBRT Policy Shift Added to Selling Pressure

The Central Bank of the Republic of Türkiye (CBRT) paused its rate-cutting cycle in March, and expectations for easing in April were pushed further out.

This shift:

  • Dampened liquidity expectations
  • Reduced investor appetite for equities

As a result, selling pressure intensified across the market.

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Sharp Sector Divergence

March highlighted a clear divergence between sectors:

  • BIST-100 Index: -6.76% (12,790 points)
  • Industrial Index: -2.70% (relatively resilient)
  • Banking Index: -23.75% (sharp underperformance)

Banking stocks were the primary drag on the index, reflecting sensitivity to interest rate expectations and policy uncertainty.

Geopolitical Risks Remain the Key Driver

Ongoing tensions involving the US, Israel, and Iran continue to shape global market sentiment.

If the conflict persists:

  • Risk aversion is likely to remain elevated
  • Market volatility could increase further

This environment may also impact:

  • External balances
  • Asset pricing behavior in emerging markets

Base Case: Moderate Disinflation Scenario

Under a more constructive scenario—where geopolitical tensions ease and oil prices stabilize in the $75–80 range—the following outlook is projected for Türkiye:

  • Year-end inflation: ~27%
  • Policy rate: ~32%

This scenario assumes a controlled disinflation process supported by stable energy prices.

April Outlook: Data and Policy in Focus

Market direction in April will be shaped by a combination of global and domestic factors.

Global drivers:

  • US foreign policy developments
  • Trade tensions
  • Evolution of geopolitical risks

Domestic drivers:

  • Inflation data releases
  • S&P sovereign rating review
  • CBRT policy stance

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Volatility Expected to Persist

Given the current backdrop:

  • Disinflation is expected to continue, albeit gradually
  • Rate cuts may resume later, but with delays

However:

  • Foreign investor participation remains uncertain
  • Geopolitical risks continue to cloud visibility

As a result, Borsa Istanbul is expected to trade in a volatile range in the near term.

Medium-Term Upside Still Intact

Despite short-term challenges, the medium- to long-term outlook remains constructive.

  • 12-month target for BIST-100: 16,500 points
  • Implied upside potential: ~29%

This supports a continued “Buy” recommendation on the index.

Turkish Equities Trade at a Discount

Valuation metrics suggest Turkish equities remain attractively priced:

  • 7.03x P/E
  • 0.95x P/B

This represents a:

  • 40–50% discount relative to MSCI Emerging Markets

Portfolio Adjustment: Reduced Banking Exposure

Given the increasing likelihood of delayed rate cuts:

  • Banking sector risks have risen

As a result:

  • Isbank (ISCTR) has been removed from the model portfolio

Key Risks to Watch

The market outlook remains sensitive to several risk factors:

  • Escalation of conflicts in the Middle East or Ukraine
  • Energy-driven inflation shocks
  • Aggressive US foreign and trade policies
  • Delays in Türkiye’s monetary easing cycle

Excerpt from Seker Invest monthly strategy report

 

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