Crude May See Correction

The crude oil prices have a definite bearing on stock markets in India as it is an item which is imported to the extent of 70% of consumption. This is dangerous situation for a developing economy which does not have some commodity of similar importance to export on a continuous basis .  The IT related foreign earnings have been a factor that has in fact been responsible for whatever progress we see today in India over the last two decades as it could generate foreign exchange for crude imports.

It is in fact a failure on policy front by the successive govts since the reforms were initiated that no particular attention was paid to take care of stressful situation that may be faced by India in the event of either the crude oil prices going too high or in the event of some supply bottleneck developing due to war, blockade and natural disasters.

The crude prices have been at higher than comfortable level for India for far too long this time but I see relief coming due to Iran related developments lately which may diffuse the crisis for good . Also the US has gas availability so plentiful that it may see shift in energy consumption pattern there and as a result may see the crude prices moderating.

Another point is that the crude prices may be high in dollar terms but the value of Dollar as also of Rupee has been coming down due to inflation. This has maintained some kind of parity in relative value of commodities and crude.

Since the expectation of crude prices not jumping up has given hope for Indian economy to become better and stress on govt finances may be reduced, the markets may see better times ahead particularly if the RBI’s policy announcement for the new FY also are tilted towards easing money supply and lowering the interest rates.

The market has shown resilience over the week till now and Nifty stays at above 5270 at the close of business.

Hariom,

krsnaKhandelwal

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