NEW DELHI: Big voices on Dalal Street said the market is pencilling in $80-90 a barrel range for oil prices and while some short term impact on stocks due to Russia-Ukraine tensions is likely, the long-term India story remains intact.
In an interview with ET NOW, Rashesh Shah of Edelweiss Group said geopolitical events have always had a knee jerk reaction from investors and there is a global risk-off that happens immediately, gold goes up and US currency strengths.
That, he said, is part and parcel of what he would call “almost a formula” now.
“We should just be okay with that. Most of the geopolitical events have actually not created a major long term disruption in the market, whether you go back to the Gulf War or the Iraq War. We should take that in our stride. Yes, the Ukraine news yesterday was a shock to the system and there was a knee jerk reaction and a little bit of panic, but for India, this does not change anything,” said Shah.
He said India is far away from the region and not caught in the crossfire.
“The one indirect effect of this on India could be oil prices, but usually this cannot last forever. The moment this cools off in a week or two, I believe oil prices will come back to $80-100, which is what most investors are now factoring in. For India, anything more than that will always be a concern,” he said.
Nilesh Shah of Kotak AMC said there is no pause or a U-turn on India’s growth story.
“If at all, it is actually an acceleration for India’s growth story over a long period of time. Long back there was BRICS – Brazil, Russia, India, China, South Africa. Today, Russia, Brazil, South Africa are way behind India and China too. With these events, India gets even higher attention on global investors’ radars. Second, markets are markets and they will go up and down,” he said.
Shah said India imports about 4 million barrels of oil a day and a $10 price increase suggests a $40 million outflow from the government’s pocket. He said elevated energy prices create a dent, but India can afford it.
Prashant Jain said India’s ability to substantially improve its ability to absorb higher oil prices in the last 13-14 years. The outlook for the IT sector, which is a key earner of foreign exchange in India, remains quite robust.
India should be able to handle a crude, at say $90 a barrel for an extended period of time quite well, even as higher crude oil prices would be a negative for India.
Jain said there is no reason to be pessimistic about India’s long term story.
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