Markets will face pressure as rates set to rise across sectors: Report
New Delhi, May 18
Markets will face pressure from rising rates and currency headwinds, impacting rate‑sensitive sectors such as banking, real estate and capital‑intensive industries, a report said on Monday.
The report from Systematix Institutional Equities said as wholesale inflation surged in April and the rupee risks breaching Rs 100 and official CPI forecasts will soon touch 6 to 7 per cent.
"The latest Rs 3 per litre fuel price hike, following the Prime Minister's austerity appeal, is just the beginning of a larger correction," the report forecasted.
WPI inflation jumped to 8.3 per cent in April 2026, a 42‑month high, with the fuel and power segment soaring to 24.71 per cent, and this could be a phase before the full pass‑through of recent retail fuel hikes, it said.
The finance ministry's revised assessment of 5.5-6 per cent CPI inflation for FY27 now exceeds the RBI's own forecast of 4.6 per cent, the report highlighted.
The fuel price hike just covered just 7-8 per cent of cumulative under‑recoveries from months of unchanged retail prices, the report cited as a reason for further hikes.
Ease in growth, widening balance‑of‑payments stress and sticky inflation will complicate monetary policy, the report added.
Agriculture enjoys some short-term support from Rabi output and reservoir levels but faces mounting risks from higher fertiliser prices, Gulf supply disruptions for urea, and the looming threat of a deficient monsoon.
With rural inflation rising faster than urban inflation, rural demand is increasingly vulnerable.
The fuel price surge comes amid escalating tensions in West Asia and the continuing blockade of the Strait of Hormuz, one of the world's most critical energy trade routes.
Moreover, nearly one-fifth of global oil and gas trade passes through the narrow passage, and supply disruptions have pushed international crude oil prices sharply higher.
Responding to criticism over rising fuel costs, Union Minister Kiren Rijiju said India has managed to limit the increase in petrol and diesel prices despite a sharp spike in global crude prices.
He noted that several countries witnessed fuel price increases ranging from 20 per cent to nearly 100 per cent, while India's petrol and diesel prices rose by only 3.2 per cent and 3.4 per cent, respectively.
— IANS
Reader Comments
Interesting that rural inflation is rising faster than urban. That's a worrying sign for the government, because the rural economy was already under stress from poor monsoon predictions. The Gulf supply disruptions for urea are another headache. If the monsoon is deficient, things could get very bad for the agriculture sector.
I'm a small business owner and I can already see the impact. Raw material costs are up, transportation is up, and the bank is talking about raising lending rates. The report says "markets will face pressure" – that's an understatement. We're all in trouble. The RBI needs to think carefully about how to balance inflation control with growth support. And the government needs to stop blaming global factors – some of this is self-inflicted from the fuel tax structure.
So the government is telling us that a 3% fuel hike is "not much"? Tell that to the auto-rickshaw driver who has to feed his family. Tell that to the farmer who pays more for diesel to run his pump. The minister's defence ignores that for us, a 3% rise in fuel costs when inflation is already high means directly cutting back on milk for the kids or skipping a meal. Respectfully, the government needs to provide real relief, not just excuses.
The Strait of Hormuz blockade is no joke – 20% of global oil trade goes through there. But I wish the report also talked about solutions. Why aren't we accelerating our renewable energy push? Every rupee spent on solar or wind is a rupee saved from this kind of geopolitical risk. And why are we still so dependent on imports for urea? This is a structural problem that no amount of fuel price hikes can fix. We need long-term thinking, not just crisis management.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.