- India's equity markets are largely decoupled from crude oil price volatility due to increased efficiency
- Mark Matthews sees the historical link between Indian stocks and oil prices as largely diminished
- High oil inventories in Asia and Europe reduce risk from potential Strait of Hormuz supply disruptions
As Indian markets feel the brunt of the growing geopolitical tensions between the US and Iran, Mark Matthews, head of Research for Asia at Julius Baer, has pointed out that India largely remain decopled from the immediate volatility of crude oil prices.
Speaking to NDTV Profit, Matthews highlighted that the historical coupling between Indian equity markets and energy costs, including fluctuating oil prices, is no longer as substantial as the nation has become more independent.
"My sense is that the relationship between the Indian stocks and oil price vanished a long time ago because the country has become much more efficient—the economy has become much more efficient," he said.
Energy Markets
Matthews went on to share his thoughts on concerns around potential blockages in the Strait of Hormuz, offering a rather optimistic view that supply constraints will be short-lived. He pointed out that there are high oil inventories currently being held in both Asia and Europe.
"You may recall that when Russia invaded Ukraine, it went up to $120. So the market thinks that the supply is big longer term, and by the way, inventories are very high in Asia and in Europe. Europe also, through the Red Sea and the Suez Canal, has a direct connection to Middle Eastern oil," he said.
"I don't think it will have an economic impact," he added.
Finally, Matthews offered his thoughts on the Asian market and how India is positioned at a time when AI has been the buzzword. As hyper-growth in AI-centric markets like Korea faces valuation scrutiny, Mathews sees India as a primary beneficiary of reallocation.
"I think Korea is extremely overbought. And I do think that India's had a nice time to trade sideways and become less expensive. And I just feel that India's a story that remains what it is for many years to come. It's a very good long-term story. So I'm not fretting about it, and yes, I think it can do well," he concluded.
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