Rising crude oil prices and prolonged geopolitical tensions in West Asia could trigger a broader earnings downgrade cycle if Brent crude sustains above $100 a barrel, according to SMC Global CEO Ajay Garg. As reported by The Hindu BusinessLine, Garg warned that Indian markets are entering a phase of 'sustained macro risk' as the environment has shifted from benign risk to sustained macro risk. The warning comes as Brent crude in the $90-100 per barrel range remains manageable through deep price adjustments, but sustained high crude prices above $100 could intensify pressures on inflation, rupee and fiscal deficit.
Higher crude prices are now directly feeding into domestic inflation through fuel price hikes, with policy signals around conserving forex suggesting that stress is becoming domestically transmitted, according to Garg. As reported by The Hindu BusinessLine, India remains vulnerable to sustained high crude prices as a net oil importer, with higher fuel costs expected to pressure margins and keep inflation sticky. Consumption may soften, while sectors like aviation, paints, chemicals and OMCs remain the most vulnerable to sustained high crude prices.
Despite near-term risks, the Reserve Bank of India has already factored in elevated crude prices, assuming an average of $85 per barrel while projecting 6.9 per cent real GDP growth for FY27. Even if crude stays at $95 per barrel, India's GDP growth is estimated at 6.7 per cent for FY27, as reported by The Hindu BusinessLine. The policy response includes signals around conserving forex, such as reducing gold imports and overseas spending, which suggest that stress is becoming domestically transmitted.
Despite near-term risks, Indian equities continue to command a premium valuation compared to most emerging markets, supported by resilient domestic fundamentals, retail inflows, improving manufacturing activity, infrastructure spending and the government's continued pro-growth policy stance, according to Garg. As reported by The Hindu BusinessLine, the brokerage remains constructive on financials, capital goods, defence, pharma and power sectors, while consumption-oriented sectors could benefit from GST rationalisation and income tax benefits. However, sectors highly sensitive to crude oil prices and global uncertainty, including aviation, chemicals and IT, may continue to remain under pressure.
On the primary market, IPO activity is expected to remain strong through FY27, supported by a pipeline of nearly ₹1.75 lakh crore worth of SEBI-approved companies, healthy domestic liquidity and sustained retail participation, according to Garg. As reported by The Hindu BusinessLine, if the geopolitical situation stabilizes and crude prices cool down, markets could recover as inflation fears ease and liquidity conditions improve. The phase could accelerate allocation toward energy transition themes like power, renewables, and EVs, turning a near-term headwind into a long-term opportunity.
