Surging Petrol Prices, Diesel Prices, Falling Rupee, Q4 Results To Drive Equity Indices
Petrol, diesel prices jump to all time highs Indian currency has lost nearly 6% in this year against US dollar BJP leader's B.S. Yeddyurappa's loss likely to impact stock markets also
Spike in crude oil prices, falling Indian rupee against the US dollar and BJP losing out to the Congress-JD(S) alliance in the Karnataka State assembly polls, are expected to set the tone for the financial stock market indices including Nifty in the week starting tomorrow. The global crude oil benchmark brent last week jumped to $80 per barrel for the first time since November 2014, leading to the surge in fuel prices in domestic market as well. Petrol prices and diesel prices touched all-time highs on Saturday, as they reached Rs 76.24 and Rs 67.57 per litre, respectively.
Similarly, Indian rupee continues to slide even after losing around nearly 6% of its value against the US dollar. The precipitous rise of crude oil prices is expected to put Indian currency in the catch-22 situation as the jump in oil prices will likely send more dollars abroad, exerting a higher pressure on the local currency. It is worth mentioning that India imports nearly 75% of its oil consumption from abroad.
"Rupee continues to weaken against the US dollar as outflows continue across the emerging markets. However, high oil prices and political risk premium in a pre-election year is ensuring that the rupee remains as an under performer in the emerging markets (EM) basket," Anindya Banerjee, deputy vice president for currency and interest rates with Kotak Securities said.
Also Read: Will Rupee Slide To 70 Per Dollar? 5 Reasons Why Rupee Is Falling
Devendra Nevgi, founder and principal Partner, Delta Global Partners, said "Globally USD, US interest rates and crude oil prices need to be monitored due to their influence on the local markets."
According to per finance ministry estimates, oil prices may inflate India's import bill by around $25 billion to $50 billion. The surge has already pushed the cost of petrol in the national capital to Rs 75.32 per litre.
Persistently high global crude oil prices, along with the rupee's movement against the US dollar and the ongoing quarterly results season are expected to drive the trajectory of the key Indian equity indices in the coming week. However, analysts predict a negative reaction from investors on the formation of a non-BJP government in Karnataka and any further outflow of foreign funds.
Also Read: Petrol Prices Zoom To Rs. 76.24 Per Litre, Diesel Prices Touch All Time Highs
In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors sold scrips worth Rs 1,496.79 crore during the trade week ended May 18.
Foreign portfolio investors (FPIs) divested equities worth Rs 799.88 crore, or $117.63 million as per the data of National Securities Depository (NSDL).
The markets and some stocks movement will be determined by the Q4 results of some companies that include Bata India, Bharat Forge, Bosch, Cipla, Dr Reddys Lab, Future Consumer, IndianOil, State Bank of India, Jet Airways and Tata Motors.
"With Q4 results below estimates, there are concerns of downgrade in FY19 estimates," said Vinod Nair, head of research at Geojit Financial Services.
Technical charts showed the National Stock Exchange's (NSE) Nifty50 in a downtrend.
"Technically, with the Nifty ending lower for the fourth consecutive session and closing below the short term trend reversal levels of 10,630 points, the underlying uptrend has reversed," said Deepak Jasani, head of retail research for HDFC Securities.
"The coming week could see further downsides towards 10,514 points and lower. On the upside bounces, 10,692 points-level can offer resistance."
Consequently, the barometer 30-scrip Sensitive Index (Sensex) of the BSE declined by 687.49 points or 1.93 per cent to 34,848.30 points.
Similarly, the wider NSE Nifty50 edged-lower. It ended at 10,596.40 points -- down 210.1 points or 1.94 per cent -- from its previous close.
