Even as Indian equities have shown resilience to crude oil’s more than 10 per cent rally in the last two weeks, any continuation of the surge poses a greater risk to the stocks compared with other assets, JPMorgan said in a note.
Higher crude oil prices accentuate India’s twin deficit problems, fiscal and current accounts, along with rising inflation, it said. Since 2014, India has underperformed emerging market (EM) peers during periods of sharp rallies in crude oil prices, the brokerage said.
IT and defensive stocks outpace broader market when oil prices rise, it added. Brent crude prices are up 65 per cent from its 12-month low on June 21, 2017. During the same period, the MSCI India Index has gained 11 per cent, while the MSCI EM Index has risen 16 per cent.