Credit Suisse downgrades India to ‘Underweight’ on higher oil prices, calls cut ‘tactical’

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Credit Suisse has downgraded India’s position to ‘Underweight’ from ‘Overweight’ due to high oil prices, CNBC-TV18 reported on March 8. It termed the cut as ‘tactical’.

“We tactically cut India’s position to underweight from overweight and will look for opportunities to re-enter the Indian market,” Credit Suisse told the channel.

“Our downgrade of India is tactical and largely based on higher oil prices. Oil hurts the current account and adds indefinite pressure besides increasing sensitivity to United States Federal Reserve rate hikes,” they said.

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It, however, added that it still liked “India’s positive EPS revisions and positioning in credit and property cycles”, further stating that it would use funds freed from India to raise China to ‘Overweight’ from ‘Market Weight’.

The agency noted that in Asia, India is “most vulnerable to higher oil prices, along with the Philippines” and “rich valuations magnify the short term risks.

“We will use the funds freed from India to raise China from Market Weight to Overweight,” it added.

The prospect of a ban on oil imports from Russia sent crude prices soaring and fueled concerns about rising inflation.

Oil prices jumped to their highest levels since 2008 as the US and European allies considered banning Russian oil imports, in response to the country's invasion of Ukraine, while it looked less likely that Iranian crude would return swiftly to global markets.

Russia calls the campaign a "special operation".