‘Crude’ shock


Market will be influenced by a few factors like corporate earnings, crude prices, commodity prices and interest rates. The sensex may be going up after some time but there are no clear views in the market about crude process or interest rates. Fund managers have identical opinion on this. Currently soaring global crude prices and interest rate worries may offset the short term gains from good corporate earnings and keep the market in a narrow range. Oil Prices Could Negate Gains From Corporate Earnings.

Market participants continue to be worried about the surging global crude prices. They believe it has the potential to spoil the party on stock markets by adversely impacting corporate earnings and fuelling inflationary pressures in the economy. Crude prices touched a record high of $78.4 recently and, in the process, dragged down global markets. The oil scene needs to be monitored closely. As of now, the Indian basket is only around $72 and has only recently breached the $70 mark and if it is going to touch $75 soon, it would have an adverse impact on the stock market.

Another factor weighting on the minds of market players is the rising global interest rate scenario. Japan abandoned its six year zero interest rate regime and hiked rate by 25 basis points. On the home front, the Reserve bank is expected hike its repo rate by 25 basis points which it declared in its recent policy review.

Presently a close watch is required to be kept on RBI and US Fed Reserve to see where the rates are headed. A rate hike means higher borrowing costs and lower profit margins for companies. It can also lead to flight of capital from India as foreign portfolio investors are likely to pull out money from India and invest in US treasuries.

When it comes to daily movements, the market will be guided by corporate results. It may be possible to get unexpected gains in select sectors and companies. For example, IT companies are likely to outperform the market. Capital goods and cement also look attractive. Action is likely to be concentrated on large-cap stocks for near future.