New Delhi [India], July 24 (ANI): The Indian economy needs crude oil prices to cool down to the USD 75-80 per barrel range to manage import bills and currency pressure, according to Stock Market Analyst Kunal Saraogi.
Speaking with ANI, Saraogi pointed out that global geopolitical factors, particularly tensions in West Asia and elevated crude oil prices, served as the principal drivers behind the recent volatility in domestic equity markets.
“India is a big oil importer as you know. So the moment oil prices go to a hundred dollars, immediately our import bill has to be commensurate and more than that, there’s a lot of pressure on our currency,” Saraogi said.
“It’s because in any case, the immediate impact on the currency is seen with the dollar inching towards 97…I think is the major problem and that has an impact on equity markets also. So for our economy it is important for oil to come back to 75-80 levels. We can withstand that oil shock but a hundred dollar oil I think is a major shock. It will be tough for us to deal with,” he added.
“I think the moment the oil prices start to correct and because I don’t think that oil prices can continue to be this hard for too long…the moment it starts to come down, the moment it is between 75 and 80, you will see markets will start to rally,” he observed.
Saraogi noted that while Foreign Institutional Investors (FIIs) engaged in relentless selling over previous months, the scenario showed improvement with fresh buying recorded in July. He explained that a rising US dollar against the rupee put added pressure on equities.
“I think that the volatility in the markets is largely because of elevated crude oil prices and tensions in West Asia. And also we have seen relentless FII selling in the previous few months. Of course, there has been some improvement on that and there has been some buying from FII’s in this month, that is in July,” he stated.
The analyst noted that markets should consolidate for some more time until this crisis abates. “So we have seen an escalation. There was a point when it seemed as if the crisis had come down, but now it’s come back again. So I think if you look at the overall picture, once the crisis comes to an end, markets should rally,” Saraogi added.
Regarding trade developments, Saraogi stated that recent tariff announcements caused minimal impact since the market anticipated higher levies. While other nations faced a 12.5 per cent duty, India received a 10 percent rate.
He emphasized that the long-awaited US trade deal would provide a major fillip to market sentiment once concluded.
“The recent US tariff announcement, I don’t think has much of an impact. It’s because in any case we were expecting much more. All other countries have been levied at 12.5 % duty and we have been levied 10%. So I don’t think it’s too much of an impact. But the US trade deal is something that the market is waiting for a long time,” he noted.
“FIIs are already coming back into the market and we’ve seen a bit of a decline in the Korean market and in the Japanese market because all the money was actually headed in those markets. So now that that situation is reversing, I think there can be a rally in the later half of the year,” Saraogi said, maintaining a bullish outlook on Indian equities. (ANI)
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