Moneycontrol Pro Panorama | Sizzling oil adds to India’s policy headache

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

Oil prices are on the boil, with Brent crossing $90 a barrel. If you are not hearing grumbles at the pump, then thank state elections for it. But it will be a red signal for policymakers and markets as a firming up of oil prices poses a challenge to India’s import bill and its current account balance. The Fed’s hawkish stance is also giving the dollar strength, adding to the risk for oil importers such as India.

Tweeting about it, Sergi Lanau, the IIF’s deputy chief economist, says, “Oil at $90 is an issue for India, which is already running quite a bit of a current account deficit before domestic demand recovers in full. If oil doesn't fall, a deficit of at least 2.7 percent in 2022 is likely. Wide but not as bad as in the run-up to the taper tantrum.”

The main issue driving oil prices up that is visible now is the conflict over Ukraine, that is threatening geopolitical stability in Europe. But some of it could also be supply dynamics reasserting themselves, as Omicron’s threat to the global economy appears to be ebbing. We had written on the bull case for oil in end-December, do read. And, yes, state elections may have kept a lid on retail fuel prices, but the day polling ends, brace for some sticker shock at the pump.

But investors may be brushing aside the oil red flag, choosing to soak in the warmth in the equity markets, with the Sensex up by 1.4 percent at 12.25 pm. (However, the markets fell subsequently and closed with a minuscule loss of 0.13 percent.) Could they be taking heart from financial conditions remaining accommodative in most countries, as Manas Chakravarty points out in this piece?

While the Fed turns around its stimulus tanker back to port, how taper changes the outlook for Indian equities is a question Neha Dave set out to answer in today’s edition. She goes into the previous taper tantrum and examines what, if anything, has changed now, how India’s own monetary policy could change gears, and what investors should do. Do read.

Also, in today’s edition, as long as you had an investment plan and are sticking to it, should you even bother trying to time the market, Shishir Asthana asks? While the answer may seem obvious — it’s no — we back it up with numbers taking a 25-year horizon. Make a good plan, stick to it and let the markets do their thing while you do yours.

Investing insights from our research team
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How to popularise the Budget while earning trillions in revenues

Budget Chart of the Day: What Budget day market moves tell us about the short-term trend

Budget 2022 | It’ll be a tough balancing act

Herd Immunity Tracker: Omicron wave has taken a U-turn in Mumbai

Railways: Budgeting amid huge uncertainty

Cipla's US business scale-up places it firmly on growth path

The war for IT talent is hurting non-IT companies even more

A remote village, a world-changing invention and the epic legal fight that followed (republished from the FT)

And, in Personal Finance

Personal Finance: Don’t let short term gains cloud long term goals

Technical Picks: DLF, Hindustan Zinc, Bajaj Auto and BEL (These are published every trading day before markets open and can be read on the app)

Ravi Ananthanarayanan
Moneycontrol Pro