INSUBCONTINENT EXCLUSIVE:
However, for portfolio allocation, companies which export to oil producing countries will be preferred, while subsidy fear will keep
investors away from state-owned oil marketing companies.
Brent crude rose 15 per cent since the beginning of 2018 to over $77 per barrel on
Thursday, the highest in two years
This is likely to impact the allocation of foreign portfolio investors to Indian equities
Foreign portfolio investors (FPIs) have sold $1.2 billion worth of Indian equities since March 2018.
India imported nearly 1 billion barrels
Average Brent crude oil has averaged $67.2 per barrel in the current fiscal so far as compared with $53 per barrel in the previous fiscal
According to some economists, an average price of $ 75-80 per barrel may expand the current account deficit (CAD) as a percentage of GDP by
50-70 to close to 3 per cent
The current account deficit rose by 45 per cent year-on-year to $157 billion in the previous fiscal year.
CAD will also depend upon FPI
flows, which are not very encouraging in the past few months
This may put further pressure on the rupee, which depreciated by 5.1 per cent since the beginning of the current calendar year
The government has projected excise duty collection of 2.4 lakh crore from diesel and petrol
However, rising crude price may prompt to reduce the excise duty on retail fuels
The government has already cut excise duty once this year
It must be noted that in the last twelve days the stateowned oil marketing companies have absorbed the impact of higher crude price
Oil prices have risen by 5.9 per cent in the past 12 days
However, retail price in Mumbai was unchanged.
On the investment front, companies such as Bajaj Auto, TVS Motors, LT, KEC International, and
Bharat Forge will be more preferred given their exports to oil-producing countries
On the other hand, investors will shy away from the state-owned oil marketing companies
Theoretically, the upstream companies such as ONGC and Oil India should benefit from the higher crude prices, however probable risk of
higher subsidy pay-out will make investors cautious.
