- Indian equities face pressures from crude oil prices and global bond yields impacting market direction
- Crude prices near $107 a barrel pose risks due to India’s status as a net oil importer and rising costs
- Corporate earnings remain strong with 35% growth in small and mid-caps and 14% in large caps
Indian equities are facing a near-term mix of global and domestic pressures, with crude oil prices and global bond yields emerging as the key variables for market direction, according to Vinay Jaising, CIO and Head–Equity Advisory at ASK Private Wealth.
Jaising said the immediate market picture is being shaped by three factors: oil prices, earnings growth and the currency. In his view, India's relatively healthy earnings and liquidity backdrop provide some support, although elevated crude and global yields remain risks.
Oil - Biggest Concern
Jaising described crude prices of around $107 a barrel as “very unhealthy” for India, which remains a net importer of oil. He said the latest supply disruptions involving Saudi Arabia have made the global supply outlook more uncertain, with alternative routes also coming under pressure.
He also pointed to higher freight and shipping costs, which can add to the effective cost of imported crude. According to his estimate, India's monthly oil and gas bill could rise substantially from earlier levels if elevated prices and freight costs persist.
Despite the oil shock, Jaising sees strength in corporate earnings and credit growth. He pointed to loan-book growth of more than 18–19%, while estimating underlying consumption growth at around 16–17% YoY even after adjusting for NBFC growth.
He also cited earnings growth of about 35% for small and mid-caps and 14% for large caps, although he noted that the broader earnings contribution is skewed towards smaller companies.
Forex Reserve Cushion
India's foreign-exchange reserves are another support, according to Jaising. He said reserves were around $785 billion and could cross $800 billion in the near term, based on the flows he cited.
However, he cautioned that global interest rates could complicate the currency outlook. A US rate increase could strengthen the incentive for investors to move money towards dollar assets, particularly with US and Japanese bond yields elevated.
Sectoral Picks
Jaising said “cash is king” and earnings should remain the key filter in the current environment. Within equities, he sees the financial sector, particularly NBFCs, as an area to watch, citing strong liquidity, festive-season consumption and the potential for capital expenditure to support credit demand.
On IT, he is cautious on Indian IT services because AI is disrupting parts of the traditional services model. Instead, he suggested looking for companies that could benefit from the sharp rise in US AI-related capital expenditure.
He is also constructive on pharmaceuticals, particularly domestic formulations and select companies serving global markets through CDMO and specialised products.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.