Rising crude oil prices biggest headwind for markets, says market expert
Mumbai, May 18
Rising crude oil prices have emerged as the biggest concern for financial markets, with inflation fears, higher bond yields and foreign fund outflows creating pressure on equities, a market expert said on Monday.
Speaking to IANS, Shrikant S. Chouhan, Head, Equity Research at Kotak Securities said crude oil prices continue to remain elevated with no signs of relief, adding that prices increased further by around $2-3 over the weekend.
"As long as crude prices remain high, inflation concerns will continue to dominate global markets," he said.
He noted that persistent inflationary pressure is leading to a sharp rise in bond yields, especially in the United States.
Referring to developments last week, Chouhan said US bond yields across 10-year, 20-year and 30-year maturities witnessed a significant surge.
"These bond yields are now moving towards exceptional levels. Whenever such a trend emerges, bond markets start attracting large investments," he told IANS.
Chouhan explained that higher returns in developed market bonds usually trigger capital outflows from emerging markets such as India, as global investors shift funds towards safer debt instruments in markets like the US and Japan.
"Because of these global headwinds, Indian equity markets are likely to remain range-bound in the near term," he mentioned.
Speaking on foreign institutional investor (FII) activity, he said persistent selling by overseas investors is linked to rising global uncertainty and elevated crude oil prices.
He added that if crude prices sustain around the $105-$110 per barrel range, the impact could begin to reflect more strongly on the global economy.
He also pointed out that higher crude prices are weakening currencies across markets, adding to concerns for emerging economies dependent on energy imports.
"The combination of expensive crude oil, rising bond yields and continued foreign fund outflows is creating a challenging environment for equity markets globally as well as in India," Chouhan noted.
— IANS
Reader Comments
While I understand the expert's analysis, I think the government should focus more on strategic oil reserves and alternative energy sources. Let's not just react to global trends but build long-term resilience. High crude prices hit our import bill hard.
From what I see in global markets, this correction was overdue. India's economy is relatively strong compared to others, but $110 oil will hurt everyone. Let's hope OPEC increases supply soon. Range-bound market is better than a crash! 📉
Honestly, I'm worried about my mutual fund investments. The article says FIIs are selling because of higher US bond yields. I wish our regulators would take steps to retain foreign investors. Being dependent on global flows is risky for a growing economy like ours. 😟
Interesting analysis from Mr. Chouhan. The point about currency weakening is crucial - a falling rupee makes imports even costlier, creating a vicious cycle. I'd suggest investors look at sectors like IT and pharma that benefit from rupee depreciation. Just my two cents.
Respectfully, I disagree with the tone of this piece. India has navigated worse crises before. Yes, $105 crude is a challenge, but our GST collections and manufacturing PMI are strong. Markets will correct but long-term story remains intact. Stay invested, don't panic. 💪
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