For India, the jump in global crude oil prices

Crude oil prices continued to fall on Wednesday after a sell-off the previous day, as prices fell nearly 8% to cross the $100 per barrel mark for the first time in three months on concerns about a global economic slowdown and rising Covid cases in China. Went.

Brent for September settlement slipped 30 cents to $99.19 a barrel on Wednesday, while the West Texas Intermediate version was trading at $96 a barrel.

While a possible slowdown in Western economies will adversely affect India’s export demand, analysts said a sustained fall in crude oil prices will protect margins of Indian companies, which have suffered a sharp fall in energy prices after Russia’s invasion of Ukraine. Have seen february. India imports about 85 per cent of its oil requirement.

On Wednesday, US inflation rose to 9.1%, the fastest pace in 41 years, setting the Federal Reserve on track for another big interest rate hike later this month. “The major positive development from India’s economic and market outlook is the crash in Brent crude below $100 for the first time since March 22. VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, “The bulls may latch on to this good news. Brent saw a high of $127.18 per barrel last month, and its decline towards the $100 level is a significant positive.

Mahindra & Mahindra Chief Economist Satchidanand Shukla said a fall in global oil prices will help India’s trade balance after a record trade deficit in June. A narrowing trade gap will support the Indian currency, which hit a record low for the third session on Wednesday as foreign investors continued to dump local assets. The rupee ended 22 paise lower at 79.81 against the US currency, as US inflation concerns weighed on traders.

India’s benchmark indices started trading in positive territory on Wednesday, helped by a fall in crude oil prices and strong macro numbers, but lost gains later in the day as negative trends in European markets kept investors nervous. Gave. The Sensex and Nifty lost 0.69% and 0.57%, respectively. Jatin Trivedi, an analyst at LKP Securities, said, “Crude oil price falling below $100 could be a positive trigger for the rupee, but inflation numbers from the US would give a major trigger to the rupee’s movement against the dollar.”

Analysts warn that while rates action in the US could affect markets in the near future, it will not be without a potential silver lining in the long term.

June CPI inflation in the US was expected to be 8.8%. However, the reported numbers stood at 9.1%, which is not good news for the markets, analysts said. With the prevailing risk-off sentiment, dollar demand is likely to remain higher, likely to put pressure on the rupee, he said, adding that falling commodity and crude oil prices could turn positive in the near term.

A significant short-term trend is weakness in information technology stocks on the back of a possible slowdown in the US and Europe, and a firming in banking stocks on strong credit growth in India. “IT is vulnerable to margin pressures in the industry and fears of a possible US recession. On the other hand, banking is strong on the back of strong fundamentals of the banking segment and impressive credit growth in the economy,” said Siddharth Khemka, Head of Retail Research, Motilal Oswal Financial Services Ltd.

Sectors that are likely to ease selling pressure on the recent weakness in crude oil prices include autos, cement, airlines, paints and petrochemicals. Shares of the country’s leading airline IndiGo rose 2.88% on Wednesday. Asian Paints shares rose 1.7%. Cement companies, which are facing heavy cost pressure, may also see improvement in their margins. For auto companies, a drop in fuel prices could boost demand as the cost of ownership has declined.

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