After opening the day in red, share markets in India have continued the downtrend and are presently trading below the dotted line. Sectoral indices are trading mixed with stocks in the metals sector and stocks in the power sector trading in red. While stocks in the consumer durables sector are trading in green.
The BSE Sensex is down by 160 points (down 0.5%) and the NSE Nifty is trading down by 50 points (down 0.5%). Meanwhile, the BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading down by 0.5%. The rupee is trading at 65.01 to the US$.
In the news from the commodity space, as per a leading financial daily, the Organization of the Petroleum Exporting Countries (OPEC) and Russia are working on a long-term deal to cooperate on oil supply curbs that could extend controls over world oil supplies by major exporters for many years to come.
As per the news, Saudi Crown Prince Mohammed bin Salman said that Riyadh and Moscow were considering extending an alliance on oil curbs that began in January 2017 after oil prices crashed.
Note that crude oil prices have been witnessing a rising trend of late. It hit its 28-month high level in November, as can be seen from the chart below, and is trading at similar levels presently.
Crude Oil Hits 28-Month High
However, this is not good news from India’s perspective.
As we wrote in a recent edition of The 5 Minute WrapUp…
- Fiscal revenues are at risk. Particularly if the government is forced to consider a cut in fuel excise duties due to a rally in oil prices. In recent times, a sharp jump in excise collections has helped indirect tax collections. Any risk to revenues and subsequent threat to the fiscal deficit target at 3.2% of GDP would require tighter spending cuts.
central bank’s scope for further rate cuts.
Lastly, low crude prices were a positive growth impetus through higher discretionary incomes for households and lower input costs for manufacturers and farmers. Part of this benefit is likely to be eroded as retail fuel costs rise. As for corporations, expansion in gross margins caused by falling commodity prices is also likely to wane, pressurising profitability.
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