Sure, we can give retail investors and DIIs the credit for this breakneck rally we’ve seen over the past 18 months. But over the short-term, a key trigger buoying the markets is falling crude prices.
This time around falling oil prices aren’t indicative of sluggish demand, but heightened supply. Non-OPEC oil producers are chipping away at the stalwart’s market-share, flooding the markets with cheaper fuel.
While oil has exited the stage to give renewable energy its share of the limelight, we all know who is running the show behind the scenes. Experts estimate that demand for crude oil is likely to surge, as the burgeoning AI-sector will only expand, and with it, the need for fuel.
In a recent update, Google-parent Alphabet gave up its ‘carbon-zero’ claim as its bet on artificial intelligence led to emissions soaring by around 50 percent, while other tech giants have doubled down on purchasing carbon offsets.
However, Goldman Sachs shares a contrarian view to most oil experts: AI will actually weigh on oil prices. Artificial intelligence could improve logistics capabilities and boost oil production, leading to higher supply which will push oil prices down.
Regardless, it seems like oil isn’t going away anytime soon, and the AI revolution could be a make-or-break moment, driving (or curtailing) demand in unprecedented manners. The markets, as always, are watching closely.
Uno Minda (Rs 1,132, -3%)
Kotak Institutional Equities downgraded the stock to a 'sell' rating.
Bear case: Growth momentum to moderate amid slowdown in passenger vehicle segment and new porduct addition coupled with capacity expansion to drag margins lower. KIE also sees risk reward for the stock as unfavourable due to expensive valuations.
Bull case: Despite moderation, the company is likely to continue to outperform industry growth driven by the premiumization trend across 2W and 4W, strong order wins and market share expansion.
Suzlon Energy (Rs 76.25, +2.8%)
The company sold and leased back its prime real estate in Pune for five years, raising Rs 4.4 billion.
Bull Case: The capital will be used to enhance execution capabilities. Company is expected to secure over 2GW of additional orders in FY25 and FY26. Government plans to tender 10GW of wind capacity annually from FY23-27 which might create opportunities for Suzlon. Company is net cash positive with a cash reserve of Rs 13 billion as of June 2024.
Bear Case: Negative surprises in Wind Turbine Generator (WTG) execution and order inflows could pose risks to the company. Stock has been trading within a narrow range of Rs 75-80, indicating uncertainty among traders.
(With inputs from Vaibhavi and Neeshita)
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