New Delhi [India], October 29 (ANI): Challenges facing Indian stock markets could go away at the click of a moment if crude oil prices cool by USD 20–25 per barrel, Sunny Agrawal, Head of Fundamental Research at SBI Securities, said, attributing the recent pressure on equities largely to external factors rather than domestic economic weakness.
In an exclusive conversation with ANI, Agrawal said India’s domestic economic indicators remain strong, with robust credit growth, vehicle sales and consumer spending providing support to the economy. However, elevated crude oil prices and rupee depreciation have increased inflationary pressure and weighed on investor sentiment.
“The challenges are more global in nature rather than domestic in nature, and the challenges can go away at a click of a moment,” Agrawal said.
He said crude oil prices had risen by 60 per cent in the last six-seven months, while the rupee had depreciated by approximately 10 per cent over the last one year. India imports 85 per cent of its crude oil requirement, making the economy vulnerable to higher international prices.
Agrawal said a decline in crude oil prices could change the market narrative in India’s favour. If prices fall below USD 100 or USD 90 per barrel, it could support Indian equities in the short to medium term. However, an escalation in the US-Iran war that pushes crude prices to USD 140–150 per barrel could lead to a further market correction.
He also pointed to the impact of weaker rainfall, saying the country had received 15 per cent less rainfall than the long-period average. This could affect rabi crop sowing and output in some areas, particularly where reservoir water levels are low.
Despite these external pressures, Agrawal said the domestic economy remained on a strong footing. Systemic credit growth has been hovering around 17–18 per cent, while two-wheeler and passenger vehicle sales have remained robust.
He also said spending in consumer discretionary sectors, including jewellery and hospitality, had not shown signs of a slowdown.
On market valuations, Agrawal said the Nifty 50 was trading at around 16–17 times its one-year forward earnings, below its 10-year average of 20 times. He said valuations were neither expensive nor cheap at current levels and advised investors to assess companies’ valuations alongside their earnings growth.
He also recommended a bottom-up stock-picking approach rather than focusing only on benchmark indices. According to Agrawal, some small- and mid-cap companies have delivered 20–25 per cent growth in stock prices as well as earnings over the past two years.
Agrawal further said foreign institutional investor ownership in the NSE 500 had fallen to a 17-year low of 16.2 per cent, while domestic mutual fund ownership had reached a record high of 12.2 per cent.
He said stable rupee movements and possible reductions in capital gains tax and Securities Transaction Tax could help improve the attractiveness of Indian equities for foreign investors. (ANI)
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