What $100 crude oil means for India: Market & sectoral outlook with Dr Mukesh Jindal

Time of India

4 hours ago

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As global tensions rise and crude prices swing, how should Indian investors read the market? In this exclusive chat with ETMarkets' Neha Vashishth, Dr. Mukesh Jindal of Alpha Capital explains what's driving the volatility, which sectors to watch, and why domestic investors now hold the real power in Indian markets.Excerpts:Last few weeks were critical. The Iran-Israel conflict unexpectedly disrupted the strong rally we've seen since April 7. Over the last two months, markets surged 15–20% due to factors like the Trump tariff issue easing, RBI and global rate cuts, and strong capex push by the Indian government.However, the Iran-Israel crisis came as a surprise and could have far-reaching consequences. Iran is the fifth-largest crude oil producer. A prolonged conflict could impact crude prices, which directly affects emerging markets like India, where we import 80% of our crude needs.If crude oil crosses $90 or shipping in the Persian Gulf is blocked, we could see prices spike to $100. So far, Brent is near $75-80. It has risen 30% since April and 10% last week alone. Historically, markets react sharply in the initial days of a crisis but tend to bounce back, if the conflict doesn't escalate further.Wars are tragic, but one sector that gains from geopolitical tensions is defence. In India, defence stocks have surged, the defence index is up 50% in 3 months and 4x in the last 2 years.The government's push for domestic defence manufacturing is key. We've moved away from heavy imports to building our own systems. Defence exports are rising, and there's global demand for Indian missiles and tech.However, the only challenge is valuation; the defence index trades at a PE of 75. So, I'd recommend looking at this sector for the long term and using corrections as entry points.Airlines, Paints , Tyres: Crude is a key raw material.Downstream oil companies (like BPCL, Indian Oil ), Margins get hit.Upstream oil companies (like ONGC ) benefit as selling prices rise.Pharma & IT: These are export-oriented. A weaker rupee makes them attractive. Pharma also remains defensive in crises.Absolutely. The repo rate is now at 6.25%. This was a surprise — the market expected only a 25 bps cut. RBI had been hawkish for too long, keeping rates high even as inflation was falling. Now, with CPI at just 2.82%, there's room for more cuts.Banks/NBFCs – Lending becomes cheaper; credit growth improvesConsumers – Loans for housing and personal needs increaseHowever, some caution:NIMs (Net Interest Margins) may compress.Microfinance and personal loans show rising NPAs. RBI has flagged this.Stick to strong private banks and NBFCs with healthy balance sheets and low NPAs. Valuations are still attractive in parts of this space.Watch out for:Airlines, tyres, paints, and margins get hit when crude crosses $80.If crude stays below $80, the impact is limited.Sales and profit growth have stagnated.Rising competition from private/unlisted brands is hurting listed FMCG giants.Rapid disruption in two-wheeler and four-wheeler space.Example: Ola Electric's struggles after early success.Needs a selective investment approach.Yes. The dynamic has changed drastically in the last 10–15 years. Earlier, markets were FII-driven. Now, mutual fund SIPs, around ₹27,000 crore/month, are the 'hand of God' for Indian markets.Stability in volatile times.Growing domestic participation, expected to last for the next 10–15 years.In fact, if SIP flows weren't so strong, the market might have corrected 40–50% between Oct 2024 and Feb 2025, when FIIs sold ₹3 lakh crore. But we only saw a 15% correction.India's equity mutual fund AUM as % of GDP is just 7%, compared to 30% globally, and 72% in the U.S. The runway for growth is massive.Sure, we must keep an eye on:US deposit rates are ~4.5%, dollar borrowing costs ~9–10%.This hurts exports, FII inflows, and global demand.Rate cuts globally will be crucial for stability.Iran is the world's 5th-largest oil producer.If the conflict escalates, oil supply disruptions could spike prices, hurting global growth.Initial fears have eased, but 10% base tariffs remain.Uncertainty continues as Trump's policy direction is unpredictable.DXY index has fallen from 110 to 98.A weaker dollar supports emerging markets like India.: I would have picked defence, but current valuations (PE of 75) are stretched.So, my top pick is Capital Markets:With RBI cutting rates and FD returns going down, more money will flow into equities. Capital market companies are positioned to benefit massively.