"This time I am s*%t scared." It is rare to hear a market analyst say this on live TV, especially one that is usually bullish. This week has been a mix of highs and lows, with the start indicating that pain points from the ongoing blockade of the Strait of Hormuz may already be in the price. But a comment from Trump-that an 18-hour flight to Islamabad to negotiate with the Iranian side is "not worth it"-has put things in perspective.
June futures on Brent crude hit $126 per barrel on Thursday before easing to $108 at Friday's close. While crude is not at all-time highs globally, for India it is effectively at elevated levels-and that is what could trigger price action at the pump.
At the same time, the Indian rupee registered a record closing low of 94.92 against the US dollar, after touching 95.33 earlier in the week. The big question now is how long before India passes on prices at the pump. Some analysts say second-order effects on smaller businesses could start showing in another two weeks if nothing changes quickly.
Can India Protect Junta From High Prices?
The conversation around every election is that petrol and diesel prices are adjusted only after polling so that voters are not displeased at the ballot box. Polling across five states ended on April 29, and the focus now shifts to results on May 4.
A Kotak report flagged the possibility of fuel hikes, with costs rising by Rs 25-28 a litre, even as the government denied reports suggesting a price increase due to higher international crude oil prices. The report noted that the current freeze in fuel prices during the election period is not sustainable, with oil marketing companies facing pressure.
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Crude oil prices have hovered around $120 per barrel, putting pressure on the pricing system and highlighting continued supply stress. If prices are not revised soon, the financial burden on fuel companies could increase further.
For now, oil marketing companies remain well capitalised to absorb some of the pressure. With polling now behind us, will we see the Hormuz pain at the pump soon?
Markets And Polls - Is There A Connection?
Do markets care about election results in five states? Yes and no. There is curiosity about what the electorate in key states thinks at a time when the Centre is grappling with geopolitical headwinds, but any reaction to the results is likely to be temporary and sentiment-driven.
April, in fact, told a very different story. Indian equity benchmarks registered their best monthly rally in nearly two years, as investors shrugged off concerns from the US-Iran conflict. The NSE Nifty 50 and the BSE Sensex rose over 7.4% each, marking their biggest monthly gain since December 2023, when they had climbed 7.9%. This was also the strongest April performance since 2020, when both indices had advanced more than 14%.
That resilience now faces a different test. Any big surprises on 4 May could still trigger a sharp reaction in either direction, but the bigger variable remains oil and its transmission into the domestic economy.
Look At Value, Not Growth
On the Editor's Cut this week, we spoke to Gautam Shah, founder at Goldilocks Global Research, who emphasised that the opportunity now lies in small- and micro-caps. He is less constructive on the Nifty than before and argues that investors need to look at value, not growth.
It is a sensible call at a time when growth visibility is suppressed by supply disruption. This may also explain why the initial reaction to companies reporting strong quarterly numbers is positive, but the enthusiasm fades quickly. Data from the fourth quarter and the last financial year already looks dated. The world has changed too much in the last sixty days.
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