Crude falls to pre-Russia-Ukraine War lows

There have been roaring talks of the Indian Markets hitting all-time highs in the current month after having a good round of correction in the second quarter of the current calendar year. Nifty has generated more than 20% returns from the lows made in the month in the short time frame of around 6 months thanks to some of the positive development on the domestic and the global front.

Among the major developments, one of the top reasons for the Indian markets to outperform is the sharp fall in the crude oil prices after it skyrocketed to the highs of $125 per barrel plus levels when the news of the Russia-Ukraine war was at the center stage.

Below are the major reasons for the recent fall in oil prices:

1. Data from China, and Europe point to economic weakness
2. S. crude inventories dropped last week – sources, citing API
3. No negative news from the Russia-Ukraine War
4. Investors uncertain about U.S. interest rate hikes

India, which is one of the major importers of crude oil in the world was hit badly by this sudden rise in oil prices and it has to go to the other route to bring oil to the soil at a discounted price. As the prices were trading at a very uncomfortable price, the Indian government decided to import Russian oil who was ready to supply at a discounted price from the market.

The current downfall in the oil prices is acting as one of the major factors for the equity market outperformance and will have a definite positive effect on the economy of India and many sectors and companies will also get benefited from this development. The Indian government has taken many steps to control inflation on the domestic front and is also successful in doing so. Soaring crude oil prices on the other hand were one of the major factors behind the rising inflation.

Below are the sectors which will get benefited from the slide in oil prices:

1. Paint Companies
2. Oil Marketing companies
3. Tiles companies
4. Aviation Companies

Below are the companies that will be negatively impacted:

1. Upstream Oil Exploration companies like ONGC, and OIL India.
2. Oil Drilling companies.

From the current juncture, we expect the crude oil prices to consolidate and may also retrace back to 85-90 dollars per barrel but we are now more prepared even for 100 levels as an economy. From the market point of view, it is very positive for many sectors and stocks and any further slide will fuel further upside in the equities in the coming few weeks.