Price hike in oil prices: why and how

The fuel Price in India hit the record high three figures for the first time in the history of India. On Wednesday the retail price of regular petrol hiked by 26 paise in Rajasthan’s Sri Ganganagar and reached Rs. 100.13. While the Diesel rested at Rs. 92.13 after a hike of 27 paise. The fuel prices in India vary from state to state, City to City. It is determined after implementing state and central government taxes. So why are the prices rising like never before?  After effects of the infamous Pandemic:  Due to the then on-going Pandemic, the demand of Crude Oil (pre refined petroleum) showed a significant drop in April 2020. Which then turned to a collapse in prices of crude oil.           After Pandemic, Saudi Arabia a key oil producing country voluntarily cut its supply by about one million barrels to 8.125 million barrels of crude oil to boost the prices hence to cover the loss due to Pandemic. Resulting in Price of Crude Oil hiked by about 50%. Compared to $40/Barrel

Sensex hits historic 50k Mark:

What’s next in the Indian Capital Market 

The Indian market is looking well in control of the bulls, with a growth rate of 15% this year which has led to the benchmark indices reaching record heights. The Sensex on Thursday crossed the 50k mark and the Nifty 50 reached the 14,600 for the first time in its history.
The market capitalization crossed the mark of 197 lakh crore and reached the mark of 2.7 trillion USD for the first time in its history. This elation in the market can be credited to the optimism among many investors regarding the announcements in the Budget 2021. Much part of this is also supported by the global equity which is almost of Rs 20000 crore in the cash segment of the Indian Equity market in January. This over-optimism towards the announcement of the Indian Budget is due to the fact that the Finance Minister announced that this year’s budget will be unlike anything in the past 100 years.
If the announcements of the budget fail to meet the expectations there could be some knee jerk reaction and high fiscal deficits would also put this bull run to a halt. The market is already trading at stretched valuations and any news about the rise in COVID cases or extended lockdowns across the globe could hit sentiment. On the global front, if central bankers put a pause at additional stimulus measures or loose monetary policy could dampen foreign flows.

Here are some crucial risks which could potentially weigh in on the Dalal Street:

1. Earnings: Post Q3 earnings, the market should realise that the stocks are overvalued.

2. Disappointing Budget: Budget disappoints in terms of levy of fresh tax/surcharges. Also if the interest rates are high, the budget will be disappointing for most investors. Only if the Budget is path-breaking in terms of policies (Govt spending, divestment, revenue-raising, or capital market-friendly) this up move can sustain beyond a point.

3. Central Banks raise rates: Globally, interest rates continue to rise and central banks start getting concerned if inflation is also rising in tandem. The end of the easy money policy might be around the corner.

4. US Tax hike: President Joe Biden makes noise about increasing taxes on US corporates/HNIs, increasing regulations on technology companies, and taking steps that could impact profits of the Pharma industry.

5. COVID: Covid pandemic does not come under control and lockdowns become more frequent across the globe.

6. Strong USD:US dollar continues to appreciate, reducing the lure of emerging markets.

- Mayank Mishra



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