Rising crude oil prices may lead to slow global growth

Rising crude oil and energy prices due to the Ukraine-Russia standoff may slow global growth. 

While the West hits sanctions on Russia, crude oil prices are about to reach $100 a barrel. 

Rupee to reach 80 a dollar

MD and Chief Strategist at JM Financial Institutional Securities Dhananjay Sinha shares with Moneycontrol that the Indian rupee may reduce to 80 a dollar.

On Tuesday, the 10-year bond yield rate was 6.75%. 

Furthermore, the 10-year G-sec field may harden further to 7.75-7.50%. 

The INR/USD depreciated 7-10% on the Real Effective Exchange Rate basis. Moreover, the Indian-US short-term rate differential rate may rise to over 540bp. 

In response to currency depreciation, US rate hikes, and core inflation, the RBI would increase the reverse repo rate by 100-110bp from Q2 2022. 

Ukraine-Russia crisis leading to rising crude oil prices

As the Ukraine-Russia crisis unfolds, it is a fulcrum of tension between the US and Europe and Russia on the other side. 

Furthermore, Russia veering towards China’s support and rising crude oil and energy prices may translate to slow global growth. 

Mr. Sinha says large-cap companies in urban consumption space, including QSRs, autos, and durables are great investment opportunities in the current market fall.  

However, various sectors such as IT and private banks can perform well after last year’s underperformance. 

Moreover, oil companies are surging in the wake of elevated crude oil prices. 

Future of global growth despite rising crude oil prices

Dhananjay Sinha also commented on the banking and infrastructure segments. He says they would be selective in the BFSI sector.  

While focusing on private sector banks, their choices would be led by:

Favourable asset-liability management position to gain from rising interest rates

Ability to gain market share

The extent of growth capital

Furthermore, he says the pace would stabilize to a moderate level due to the normalization of surplus domestic liquidity. 

Lastly,

As crude oil prices rise to $100 a barrel, the US 10-year yield may increase by over 2.5%. Furthermore, the retreating of Russian troops may construe as a positive incremental development.

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