Sliding crude is positive but depreciating rupee is still a concern
In the year-2022, Global Financial markets have witnessed a roller coaster ride with major of the global markets now trading in the bearish territory. India now being a part of the globalization, it have also taken heat of the global sell off and witnessed steep cuts in the equity as well as the currency markets. Indian rupee is also now trading near historical lows of around 79 levels due to strong dollar in international markets amid rising inflation in the United States.
Oil prices got under pressure correcting more than 9% yesterday on expectation of recession in the global economies. This steep slide in the prices is good for the Indian economy but the fears of recession will also keep market under check.
Now the big question for the markets will be to react positively on the sliding crude prices after the recent surge or on the depreciating rupee and expectation of recession in the global markets. It is always good for the markets to see the crude trading lower but the reason behind it should be keenly tracked. The current decline in the crude is due to slowdown and recession fears which are not good for the equity markets. On the other hand, the rupee is trading near the historical lows of around 79.50 levels. These reasons will keep the market on their toes as any further developments will trigger negative sentiments in the market.
Also, if the global economy comes in to the grip of recession then Indian economy will also face the similar heat as we are not only importing country, we also export many products to many countries all over the globe. If the slowdown becomes realty then the exporting companies will be hurt mostly and there could be direct impact on our exports which will trigger pressure on our trade deficit in the coming quarters.
Stronger rupee always have a positive effect on the importing companies who imports their raw materials or finished good from any foreign country while vice versa, it will be negative for corporate companies who majorly exports their products outside India. Similarly, a depreciating rupee will have positive impact on exported oriented units which are engaged in product and service export businesses.
There will be some relief in the inflation figures if the crude and the metal prices slide but if the economic activity takes the pause then the negative impact will be much higher. We recommend investors should start building their portfolios in these bad times where Rupee is at record lows, inflation is at record highs and crude have started to become soft from higher levels. For short tern investors, it is the time to stay in the market with proper hedge and have strict stop losses and targets placed in the market.
Investors and the traders should have close watch on the crude, rupee and the inflation figures in the near term to judge the further movement in the index. While any steep corrections may be utilized to add fundamentally strong stocks in to the portfolio. Recession news all over the globe will be the only negative factor which will be keenly observed by the market participants.