Article

Sliding Crude Oil prices– A catalyst to the ongoing bullish move in the equity markets

date September,  2022
time 2 mins read

Nifty has been in bullish momentum for the past couple of months and has shown a sharp recovery from the recent swing lows of 15200 levels to the almost 18000 mark. The rally was well fuelled by the global markets in the initial stage but later was carried away by the foreign institutional investors who turned net buyers on monthly basis in the last month.

FIIs inflows followed by continuing SIPs from the retail investors into the equity markets have made the Indian stocks resilient to global shocks. Any global uncertainty and negative news flow have failed to gather downward momentum indicating the inherent strength in the Indian equities.

In the recent past, we have observed that the global markets have again become jittery after the hawkish commentary from the Federal Reserve chairman with respect to the interest rates. The panic was well supported by the ongoing tensions between a few big economies with regard to Taiwan and the slowing growth numbers from China.

Commodity markets were majorly impacted by this nervousness where the major commodity prices along with Gold and crude oil started sliding lower. The price of Gold slipped below 1700 USD per Troy Ounce mark in the current week while crude oil prices are also oscillating below 90 dollars per barrel. This has created some panic in the global equity markets where the upside remained capped while on the other hand, the Indian equity markets started rejoicing which is clearly visible in the numbers.

If we take the last one-month statistics, Dow Jones Industrial Average (DJIA) which is the US index has generated a negative return of around 4% while the Nifty has made gains of more than1.5% in the same period. The major reason behind such outperformance is the sliding commodity and crude oil prices in the international markets.

Currently, in the global markets, everybody is now talking about the rising inflation which has made the central banks raise the interest rates. On the domestic front, still inflation seems under control, and falling commodity and crude oil prices further from the recent highs will pull the rise in prices much lower.

The Crude Oil prices were trading above 125 dollars per barrel a few months back and now are back to double-digit which too below 90 dollars. If the scenario remains stable at current levels then we may see good upside in the Indian markets as this will give a cushion to the Reserve Bank of India to put a temporary pause or at least keep the pace of the rate hikes slower.

Overall, we expect the markets to test 18000 plus levels in the near amid ongoing positive sentiment and news flows where the crude oil prices will play a major role. On the other hand, if the rupee starts strengthening from the current levels, then that will add as a further catalyst to the ongoing bullish momentum in the Indian equities. As a trader or investor, one must keep a close eye on commodity prices, crude oil fluctuations, and the rupee movement against the dollar in the near term to decide the further market trend.