Prolonged Ukraine crisis, high crude prices may push India's import bill up by 15 pc: Experts - Business Guardian
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Prolonged Ukraine crisis, high crude prices may push India’s import bill up by 15 pc: Experts



It is a crude shock with many implications for the world and India.

The surge in Brent oil to USD 105 a barrel for the first time since 2014 driven by the escalation of the Ukraine crisis has triggered fears of a disruption to the region’s critical energy exports with consequences for India.
The genesis of the crisis is Russia’s status as the world’s second-largest oil producer, which mainly sells crude to European refineries and is the largest supplier of natural gas to Europe, providing about 35 per cent of its supply. The Brent touched over USD 96 per barrel on Tuesday as fears rose over supply-side disruptions amidst current shortages of oil stemming from the spike in global demand and low production by OPEC.

The threat of sanctions forcing Russia to supply less crude or natural gas would have substantial implications on oil prices and the global economy. According to Hetal Gandhi, director, CRISIL Research, the conflict between Russia, second-largest exporter of crude oil with 12 per cent market share, and Ukraine has expectedly raised already-elevated crude oil prices to 8-year high and prices could stay over $100 per barrel in the near to medium term unless the OPEC decides to increase output materially.

“Over the past three months, OPEC members haven’t been meeting their production targets, which has influenced prices. The result is energy and trade-deficit negative for India, since we import nearly 85 per cent of our crude oil requirement,” said Gandhi. “If crude hovers around the USD 100 a barrel mark, India’s import bill can jump around 15 per cent in the months to come,” added Naveen Mathur, director of commodities and currencies, Anand Rathi Shares and Stock Brokers.

Price of oil could go above USD 100 a barrel due to a combination of the Ukraine crisis, cold winter in the US, and a lack of investment in oil and gas supplies around the world, opines Navneet Damani, senior vice president (commodity and currency research) of Motilal Oswal Financial Services. “Russia accounts for one in every 10 barrels of oil consumed globally. Hence it is a major player when it comes to determining the price of oil. An escalation due to the crisis is really going to hurt consumers at the petrol pumps,” said Damani.

Crude oil-related products have a direct share of over nine per cent in the WPI basket. “The rise in crude oil prices is also expected to increase the subsidy on LPG and kerosene, pushing up the subsidy bill,” added Damani.

“For India, a rise in crude prices poses inflationary risks,” said Mathur, with implications for the monetary policy going ahead. Indian oil marketing companies can change the price of fuel sold at retail pumps every day to align it with the international rates. But they have left the prices unchanged since November.

“Despite the steep increase in crude oil prices, OMCs are desisting due to the elections but once they are over, there could be a steep increase in the pump prices, anything between Rs 10-15 increase,” said Aditya Shah, Chief Investment Officer of JST Investments.

The rise in global crude oil prices as a potential trigger to India’s financial instability was recently flagged at the meeting of the Financial Stability Development Council (FSDC). “It is difficult to say how crude prices will go. In the FSDC when we were looking at the challenges which are posed for financial stability, crude was one of the things,” Finance Minister Nirmala Sitharaman said. “These are international worrisome situations where we actually voiced that we want a diplomatic solution for the situation that is developing in Ukraine. All these are headwinds,” the Finance minister said.

“India needs to be ready for the energy market volatility,” agrees Aditya Shah as he spelt out the multiple scenarios that may unfold. He said it is obvious oil is set for an upward bias which will adversely impact the Indian economy which may be offset for the short term if the US releases oil from the strategic reserves. “It portends not positively for the Indian economy as a whole because this will push up the current account deficit on account of a higher oil import bill. This in turn will push inflation into the Indian economy and the global economies.

Gaurav Moda, partner and leader of the energy sector, Ernst & Young India, points out that in the Indian oil market, the crude essentially translates into the oil that is used for trucks and cars. Diesel is about 50 per cent of the oil market, petrol is 20 per cent and LPG, kerosene and aviation turbine fuel which make up the rest 25-30 per cent.

“So a high import bill for Indian oil marketers and its impact would be visible — from the petrol perspective — individually and directly as well as through the truck movement which carries most of the goods across the country. This would push up logistics cost, and therefore, the prices of commodities in the country,” points out Moda, adding that the extent of the impact would depend on how long the crisis would take to settle down.

Investors are also closely monitoring the Iran nuclear talks amid signs of progress. A potential deal could add more than 1 million barrels a day of supply and help ease a tight global market. Hetal Gandhi offers a window of optimism. “Thankfully, India’s gas requirements are locked in contracts with Qatar, the supply of which is unlikely to be affected if the war doesn’t spillover. However, the impact of higher gas prices would be felt in India, just like everywhere else. Global production and supply of energy will be in a state of flux in the short-term, and will impact countries dependent on imports.”

Damani also cautions that OPEC+ has some spare capacity, but it is in oil and whether it will deem it prudent to release it and how quickly it could unleash the barrels is a question mark. (ANI)

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Markets to track geopolitical events in holiday-shortened week: Analysts



Geopolitical events, macroeconomic data, and quarterly earnings of corporates would guide the stock market in a holiday-shortened week ahead, analysts said. Stock markets will remain closed on Wednesday for Ram Navami.

“This week promises to be crucial for the market as fresh worries about a potential conflict between Iran and Israel emerge. Any significant escalation in tensions could trigger panic selling and volatility in global equity markets. The market will also be closely monitoring the movement of crude oil prices, which are often impacted by geopolitical events,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Investors will be watching for earnings reports from Infosys, Bajaj Auto, and Wipro later in the week, he said. On the macroeconomic front, China’s GDP data, US retail sales figures, and movements in the US bond yields and the dollar index will be important factors influencing market sentiment, Meena added.

Shares of TCS will remain in focus on Monday. The company reported its January-March quarterly earnings on Friday. The IT services major logged a 9 per cent growth in net profit at Rs 12,434 crore in the fourth quarter of FY24 due to strong domestic business even as the company struggled in its key markets overseas. In the entire fiscal year, the Tata Group company’s net profit surged 9 per cent to Rs 45,908 crore, while the revenue went up to Rs 2,40,893 crore from Rs 2,25,458 crore a year ago.

“The outlook for the market will be guided by the major global and domestic economic data, India’s WPI inflation data and WPI manufacturing data, China GDP growth rate, US manufacturing production and US initial jobless claims,” Arvinder Singh Nanda, Senior Vice President, Master Capital Services Ltd, said.

Retail inflation declined to a five-month low of 4.85 per cent in March mainly due to cooling food prices, inching towards the Reserve Bank’s target of 4 per cent, according to official data released on Friday. India’s industrial production growth accelerated to a four-month high of 5.7 per cent in February 2024 due to good performance of the mining sector, showed the government data released on Friday.

“Investors are closely monitoring Q4 earnings and geopolitical events, which are poised to shape market direction,” said Vinod Nair, Head of Research, Geojit Financial Services.

Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said, while the Indian economy is on a firm footing, the spate of negative news, especially from the global front, would at times halt the Indian equities’ upward march.

Stock markets were closed on Thursday on account of Eid-Ul-Fitr. Last week, the BSE benchmark Sensex dipped marginally by 3.32 points after a record-breaking rally. The benchmark had settled at an all-time high of 75,038.15 on Wednesday. It had reached the lifetime peak of 75,124.28 on Tuesday.

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Sensex soars above 75,000 for first time, but expert warns of correction ahead



The Indian stock market continued its upward trajectory on Friday’s session, with the Nifty reaching a new high of 22,775.70 points, surpassing its previous record of 22,768 points. The Nifty closed at 22,753.80 points, while the Sensex ended 0.47% higher at 75,038.15 points. All major indices, including Nifty Midcap, Nifty Bank, Nifty Next 50, and Nifty Financial Services, closed in the green.

The Nifty Midcap 100 index also hit an all-time high of 50,443.15 points, closing at 50,380.40 points. Sanjiv Bhasin, Director at IIFL Securities, predicts that the market may touch the 85,000 mark by the end of the year, but warns of potential sharper corrections in the coming months. He attributes the current market highs to the reforms implemented during the Modi government’s tenure over the last decade.

Dhirendra Kumar, CEO of Value Research, emphasizes the significant contribution of reforms to the stock market and the economy, attributing the journey to the remarkable milestone of 75,000 to digitization. In broader market movements, the BSE MidCap index outperformed, gaining 0.7%, while the SmallCap index registered a 0.3% increase. Among the Nifty 50 stocks, 32 closed in the green, with Coal India emerging as the top gainer. Globally, European markets experienced an uptick fuelled by positive developments in the technology sector and rising commodity prices.

Investor focus is now directed towards forthcoming inflation data in the United States, offering insights into the Federal Reserve’s monetary policy stance. Despite mixed global cues, the Indian stock market witnessed healthy buying across sectors, supported by expectations of rate cuts, healthy corporate earnings, and political stability post the Lok Sabha elections. Technical analysts suggest that the Nifty may target the 22,850-23,100 zone, with strong support expected in the 22,350-22,500 zone in case of profit-taking.

However, market participants are advised to plan their positions cautiously amid stock-specific volatility triggered by the beginning of the earnings season.

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BSE market capitalization soars past Rs 400 trillion mark amid record-breaking Nifty and Sensex



The market capitalization of BSE-listed companies hit a historic milestone, surpassing Rs 401.10 trillion on Monday morning, driven by a remarkable rally in equities. This marks the first instance of BSE-listed companies crossing the coveted Rs 400 trillion mark, fuelled by the 30-share BSE Sensex scaling its lifetime peak.

The Sensex benchmark surged by 425.62 points, reaching a new record high of 74,673.84 in early trade. This surge propelled the market capitalization of BSE-listed firms to an unprecedented Rs 4,01,16,018.89 crore ($4.81 trillion).

This achievement comes on the heels of the market capitalization hitting the Rs 300 trillion mark in July last year. Notable gainers from the Sensex basket included Mahindra & Mahindra, Maruti, Tata Steel, Bajaj Finserv, Power Grid, Reliance Industries, Axis Bank, and JSW Steel, while Wipro, Nestle, HDFC Bank, and Bajaj Finance lagged behind.

In the global context, Asian markets witnessed mixed performances, with Seoul and Tokyo trading positively, while Shanghai and Hong Kong quoted lower. Wall Street ended on a positive note on Friday.

Meanwhile, Foreign Institutional Investors (FIIs) injected Rs 1,659.27 crore into equities on Friday, as per exchange data. Additionally, the global oil benchmark Brent crude witnessed a 1.36 percent decline, settling at $89.93 a barrel.

Indian benchmark indices soared to all-time highs during the trading session, with the Nifty touching a peak of 22,697.30 and the Sensex reaching 74,869.30 points. By the end of the trading session, the Nifty closed at 22,666.30, up by 152.60 points, while the Sensex closed at 74,742.50, surging by 494.28 points.

Market experts like Ajay Bagga attribute the bullish trend in Indian markets to domestic inflows, strong macroeconomic indicators, and expectations of policy continuity. Sector-wise, Nifty Auto, Nifty Realty, and Nifty Metal witnessed notable gains, while the Nifty PSU Bank index experienced a decline.

Globally, equities saw an upward momentum as oil prices retreated from recent highs, and European stocks displayed mixed performances. The surge in spot gold prices to a new record high at USD 2,353.80 an ounce indicates investor interest in safe-haven assets amidst market uncertainties.

The unprecedented milestone in market capitalization reflects the resilience and optimism in the Indian equity market, driven by both domestic and global factors.

Furthermore, the rally in auto stocks was fueled by positive growth in auto sales, as reported by the Federation of Automobile Dealers Associations (FADA), indicating a sustained recovery in the sector. The broader market witnessed a mixed trend, with the BSE MidCap index edging up by 0.26 percent and the SmallCap index experiencing a slight decline of 0.06 percent.

Sector-wise, Nifty Auto surged over 2 percent, followed by gains in Nifty Realty (up 1.32 percent) and Nifty Metal (up 1 percent). However, the Nifty PSU Bank index saw a decline of 0.86 percent.

Globally, equities displayed upward momentum as oil prices retreated from recent highs. European stocks showed mixed performances, with the STOXX 600 up by 0.05 percent, Germany’s DAX rising by 0.38 percent, and the UK’s FTSE 100 slightly lower by 0.19 percent. In the US, S&P 500 futures and Nasdaq futures dipped by 0.2 percent.

Spot gold reached a new record high at USD 2,353.80 an ounce, reflecting investor interest in safe-haven assets amid market uncertainties. The recent surge in oil prices due to geopolitical tensions eased following progress in truce talks in the Middle East, contributing to Brent crude’s decline to USD 90.20 a barrel.

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Stock Markets brace for Holiday shortened week amid Global cues



According to analysts, global trends, macroeconomic data releases, and the commencement of the earnings season will be the primary factors influencing equity markets during a shortened trading week due to the observance of Eid-Ul-Fitr, which will result in market closure on Thursday. Additionally, market direction will be influenced by the trading behavior of foreign investors, trends in the rupee-dollar exchange rate, and movements in crude oil prices.

“Indian companies are set to enter a new corporate earnings Q4 season this week. Leading the pack is IT services giant TCS, set to kick off the earnings season for the quarter ending March 2024.

“Its results for the fourth quarter of FY24 will be announced on April 12, 2024, after market trading hours. Apart from that India’s industrial production data will also be announced on 12th April 2024. On the same day, inflation for March will be declared,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.

Investors will closely monitor the movement of the rupee against the dollar, crude oil prices, and investment activities of Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs), Meena added.

Last week, the BSE benchmark climbed 596.87 or 0.81 percent. It hit an all-time high of 74,501.73 on April 4.

“The outlook for the market will be guided by major global and domestic economic data, India’s CPI data and IIP, US consumer inflation, US business optimism index, US initial jobless claims and ECB (European Central Bank) interest rate decision,” Arvinder Singh Nanda, Senior Vice President, of Master Capital Services Ltd, said.

Ajit Mishra, SVP – Technical Research, Religare Broking Ltd, said this week marks the beginning of the earnings season and the focus will be on the IT majors to start with.

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4 of top-10 valued firms add Rs 1.71 lakh crore to mcap; HDFC Bank, LIC lead gainers



Four of the top 10 most valued firms witnessed a notable surge in their market capitalization, collectively adding Rs 1,71,309.28 crore. Leading this upward trend were HDFC Bank and the Life Insurance Corporation of India (LIC), emerging as the top gainers in line with the overall positive sentiment in the equity market. Conversely, six companies within the top 10 pack experienced a combined decrease of Rs 78,127.48 crore in their market valuation, with Reliance Industries being the primary contributor to these losses.

During the week, the BSE benchmark index climbed by 596.87 points or 0.81 percent, reaching an all-time high of 74,501.73 on April 4. Among the gainers from the top 10 firms were Tata Consultancy Services (TCS), HDFC Bank, State Bank of India, and LIC. Meanwhile, Reliance Industries, ICICI Bank, Bharti Airtel, Infosys, ITC, and Hindustan Unilever faced declines in their market valuation.

HDFC Bank witnessed a significant increase of Rs 76,880.74 crore, reaching a valuation of Rs 11,77,065.34 crore, while LIC added Rs 49,208.48 crore, bringing its valuation to Rs 6,27,692.77 crore. TCS observed a rise of Rs 34,733.64 crore, reaching Rs 14,39,836.02 crore in market capitalization, and State Bank of India’s valuation increased by Rs 10,486.42 crore, reaching Rs 6,82,152.71 crore.

On the other hand, Reliance Industries experienced a decline of Rs 38,462.95 crore, reaching Rs 19,75,547.68 crore in valuation. Bharti Airtel saw a decrease of Rs 21,206.58 crore, reaching Rs 6,73,831.90 crore, and ICICI Bank’s valuation dropped by Rs 9,458.25 crore, reaching Rs 7,60,084.40 crore. Infosys’ market valuation declined by Rs 7,996.54 crore to Rs 6,14,120.84 crore, ITC’s valuation dipped by Rs 873.93 crore to Rs 5,34,158.81 crore, and Hindustan Unilever’s mcap decreased by Rs 129.23 crore to Rs 5,32,816.81 crore.

Reliance Industries maintained its position as the most valued domestic firm by market valuation, followed by TCS, HDFC Bank, ICICI Bank, State Bank of India, Bharti Airtel, LIC, Infosys, ITC, and Hindustan Unilever.

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Sensex and Nifty soar to record highs led by private banks and IT



On April 4, domestic stock indices, the Sensex and the Nifty, rebounded from intraday losses to close higher, bolstered by gains in private banking and technology stocks. The Sensex surged by 350.81 points or 0.47 percent to reach 74,227.63, while the Nifty climbed 80.00 points or 0.36 percent to settle at 22,514.70. Market breadth favored gainers, with around 2,337 shares advancing, 1,352 shares declining, and 115 shares remaining unchanged.

Earlier in the day, both indices had achieved all-time highs, with the Sensex hitting 74,501 and the Nifty reaching 22,619.

Analysts at ICICI Securities recommended investors to capitalize on quality stocks during dips ahead of the earnings season. They expressed optimism, projecting a gradual ascent of the Nifty towards 22,900 in the upcoming weeks. The index’s recent healthy retracement is seen as setting the stage for the next upward movement.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, anticipated a period of consolidation in the market in the coming days, with a focus shifting towards fourth-quarter results. Vijayakumar highlighted expectations of positive results particularly in sectors such as autos, capital goods, telecom, and select pharmaceuticals. Financial sectors are also anticipated to report robust results, despite potential net interest margin (NIM) compression. However, he cautioned that the information technology sector might witness tepid results, emphasizing that management commentary will be pivotal.

Meanwhile, broader markets saw gains, with the Nifty Midcap 100 and Nifty Smallcap 100 indices rising by up to 0.5 percent. India VIX, a measure of market volatility, declined over a percent to 11.2.

Sector-wise, Bank Nifty, which holds significant weightage in the benchmark Nifty, surged by over a percent, driven by strong performance from HDFC Bank. Conversely, Nifty Oil & Gas emerged as the worst-performing sector, weighed down by ONGC and Oil India. This downturn followed the Indian government’s announcement of a fifth increase in windfall tax on petroleum crude to Rs 6,800 a metric tonne from Rs 4,900 since February.

Looking ahead, market focus shifts to the Reserve Bank of India’s (RBI) monetary policy decision on April 5. Market experts anticipate a status quo in key rates, with the majority expecting the Monetary Policy Committee (MPC) to maintain its policy stance of withdrawing accommodation. Any alteration in the RBI’s stance will be closely monitored, with implications for potential rate actions. Other factors such as inflation trends, liquidity measures, and GDP growth targets will also be scrutinized.

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