Surging crude to reduce likely BJP win in Uttar Pradesh to a sideshow for investors

PM Narendra Modi (File image: PTI)

On a normal day, a possible win for the ruling BJP in Uttar Pradesh, the country’s most populous state, should be a cause of celebration for the stock market but that is not the case, not when the crude oil is at a multi-year high.

All exit polls are giving Uttar Pradesh to the BJP, arguably the biggest poll prize after the Lok Sabha election, but the sentiment is less than upbeat at Espresso Traders’ Carnival, one of the largest gatherings of some of the brightest equity and crypto traders in the country.

“I need crude oil prices to come below $100 (per barrel) for any sustainability of gains. The market is concerned about oil, not UP anymore,” said Sivakumar Jayachandran, founder and chief executive officer at OI Pulse on the sidelines of the carnival.

The 16^th edition of the carnival, being hosted in Goa, got underway on March 6 and ends March 11, a day after counting of votes in UP and four other states.

“If people are thinking that the BJP will win the UP election then the market will reverse, that is already priced in. Exit polls have shown what we can expect and yet the rally did not happen yesterday,” Jayachandran said.

Also read: Explained | What does US ban on Russian oil means for global economy?

A long list of worries

For Jayachandran, a victory for BJP in UP would remove merely one concern from the order of worries that the market is grappling with.

His sentiment was echoed by Sanjeev Prasad, head of institutional equities at Kotak Institutional Equities in a note on March 8.

“While markets will find comfort in the results and resultant political and legislative stability, the current grim macro outlook may limit any euphoria,” Prasad said.

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Indian equities have fallen nearly 15 percent from their record highs hit in October 2021 due to prospects of an increase in interest rates by the US Federal Reserve, Russia’s invasion of Ukraine, and soaring global crude oil prices.

Of the three, crude oil has become the biggest concern for the market, with the US on March 8 announcing a ban on Russian oil.

Brent futures of crude oil traded in London were up 2.5 percent at $131 per barrel at 10.45 am.

Moscow has warned that global crude oil prices could shoot towards $300 a barrel due to some western nations banning the country’s oil exports.

Also read: Crude shoots higher on U.S. Russian oil ban, Asian shares stabilise

‘Lost at sea without a surfboard’

The lack of sustainability of any gains from a positive result in the UP elections for BJP could further exacerbate the dour sentiment among traders and investors after nearly six months of skin-peeling correction.

“Currently, it’s like being lost at the sea without a surfboard with big waves approaching one after the other. I have never experienced such volatility neither in the market nor within me,” said a Kolkata-based trader, who is a regular at the Espresso Traders Carnival.

For positional traders, who bet on market directions, the volatility has resulted in the loss of confidence in years-long strategies.

“You start to question if maybe your systems are wrong,” the Kolkata-based trader said.

The feeling is likely shared among many investors as the Nifty has moved in a daily range of more than 200 points since November compared to an average range of 171 points in the prior six months.

The heightened sense of volatility is unlikely to subside anytime soon.

Disclosure: Moneycontrol is the media partner of Espresso Traders’ Carnival

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