Due to weakening of crude oil price and low PE (price-to-earnings) premium of shares, a strong recovery can be seen in the Indian stock market. This information was given in a report released on Tuesday.
Emkay Global Financial Services in its report has estimated that the Indian rupee will go back to the level of Rs 91 against the US dollar and the 10-year government bond yield will fall to around 6.65 per cent from the current 6.83 per cent and will take two to three months to return to normal.
“Nifty fell 5 per cent in the last three trading sessions, mainly due to sustained selling by foreign portfolio investors (FPIs). We expect this trend to reverse and India may emerge as one of the better investment opportunities in the region,” the report said.
However, with average Brent crude price at $80 per barrel in FY2027, India’s GDP growth will slow down to 6.6 per cent and inflation and current account deficit will increase to 4.3 per cent and 1.7 per cent of GDP respectively.
The report said that due to the war, if Brent remains above $ 100 per barrel, the current account deficit as a proportion of GDP could exceed 2.5 percent. Trade deficit could reach $85 billion.
Oil and natural gas prices have increased, but they are still well below the levels that typically characterize a shock of this scale and duration, the report said.
The report further said that Brent prices at $85 per barrel will remain largely under control, while if prices go above $100 per barrel the cascading effect will be more severe.
The report also said, “Our model simulations show that at current oil prices, the government will have to cut excise duty by about Rs 19.5 per liter on the average blend of diesel and petrol and bear an estimated Rs 1 lakh crore additional subsidy on LPG to fully compensate the OMCs’ losses.”
Such excise duty cuts would entail a fiscal cost of about 1.1 per cent of GDP.
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