Skittish investors snapped up gold and other safe-haven assets amid fears of a global economic slowdown
The sweeping economic sanctions on Russia - the second largest producer of crude oil - following its invasion of Ukraine late last month can cull global and domestic growth along with the added pains of higher inflation and currency depreciation, RBI Deputy Governor Michael Patra has said. And if the war lingers on, it can even lead to deglobalisation and even a recession, he added. The ongoing war has only added a whole new dimension to the outlook, and in fact, a weighty downside, Patra said in a lecture at the industry lobby IMC on Friday evening.
'Earning expectations remain strong.'
In December 2019, the India arm of Deloitte Touche Tohmatsu surprised many with its ultra-competitive bid to become the transaction advisor for the country's largest strategic divestment in Bharat Petroleum Corporation (BPCL). The multinational major quoted just Rs 1; the second-highest bidder, SBI Caps, reportedly quoted Rs 15-17 crore. For Deloitte, the motivation was to bag a prestigious deal adding a national energy company to its portfolio. No doubt, it expected BPCL to go to a marquee buyer in quick time.
Petrol and diesel prices, which have been on a freeze for the past four months in view of assembly elections in states like Uttar Pradesh, need to be increased by over Rs 12 per litre by March 16 for fuel retailers to break even. International crude oil prices shot above $120 a barrel for the first time in nine years on Thursday before retreating a little to $111 on Friday, but the gulf between cost and retail rates has only widened. With international oil prices - on which domestic fuel retails are directly benchmarked - spiking in the last two months, state-owned fuel retailers "need a massive price hike of Rs 12.1 per litre on or before March 16, 2022, just to breakeven and a price hike of Rs 15.1 is required" after including margins for oil firms, ICICI Securities said in a report.
India on Monday lost the ONGC Videsh Ltd-discovered Farzad-B gas field in the Persian Gulf after Iran awarded a contract for developing the giant gas field to a local company. "The National Iranian Oil Company (NIOC) has signed a contract worth $1.78 billion with Petropars Group for the development of Farzad B Gas Field in the Persian Gulf," the Iranian oil ministry's official news service Shana reported. "The deal was signed on Monday, May 17, in a ceremony held in the presence of Iranian Minister of Petroleum Bijan Zangeneh in Tehran." The field holds 23 trillion cubic feet of in-place gas reserves, of which about 60 per cent is recoverable.
Lavrov said a rupee-rouble payment system for trade with India was put into place earlier and it could be strengthened further.
India's appetite for imported crude oil may wane in fiscal year (FY) 2023 from record levels in pre-pandemic 2019-20 fiscal as higher oil prices, a spillover from the conflict in Ukraine, and increasing use of biofuels affect domestic demand for petroleum products. Brent crude surged to a nine-year high, shy of a July 2008 record $147.50 a barrel, before declining to around $100 a barrel - but the volatility in commodity rates will slow global economic growth and use of fuels. Demand for all oil products may grow at only 2-3 per cent in FY23, slower than the current fiscal and nearly half the 5.5 per cent growth estimated by the petroleum ministry, according to industry officials.
RIL said it had launched 'an internal probe' into its staff's detention.
The phone conversation between Jaishankar and Blinken came days after Russian Foreign Minister Sergey Lavrov paid a two-day visit to India.
Fuel retailers sell diesel, domestic LPG and kerosene at government controlled rates which are below market price. The loss they thus incur is made good through cash subsidy from the government and dole from upstream firms like Oil and Natural Gas Corporation.
Only the future will tell if Modi can leave his mark on the Ukraine crisis. Nonetheless, it is both a challenge and an opportunity for India's diplomacy, notes Rup Narayan Das.
Russia is among the top buyers of Indian tea, accounting for about 18 per cent of the industry's total exports.
The pressure on India to take a hostile attitude towards Russia and China was not subtle, but it was guarded, observes Ambassador T P Sreenivasan after Monday's 2+2 ministerial meeting in Washington, DC.
The high-level talks took place in the backdrop of indications that India could buy greater volumes of discounted Russian oil and both sides were keen on having a rouble-rupee arrangement for bilateral trade.
The talks are expected to take place in the Gomel region at the Ukrainian-Belarusian border, Belta news agency reported.
India's projected economic growth for 2022 has been downgraded by over two per cent to 4.6% by the United Nations, a decrease attributed to the ongoing war in Ukraine, with New Delhi expected to face restraints on energy access and prices, reflexes from trade sanctions, food inflation, tightening policies and financial instability, according to a UN report released on Thursday. The UN Conference on Trade and Development (UNCTAD) report downgraded its global economic growth projection for 2022 to 2.6 per cent from 3.6 per cent due to shocks from the Ukraine war and changes in macroeconomic policies that put developing countries particularly at risk. The report said while Russia will experience a deep recession this year, significant slowdowns in growth are expected in parts of Western Europe and Central, South and South-East Asia.
Two-wheeler exports from India fell by 17.8 per cent to 3.65 million units in 2022-23 (FY23), according to data released by the Society of Indian Automobile Manufacturers (Siam) on Thursday. This decline is due to a rise in global inflation and the weakening of economies and currencies in key export markets of Africa, Latin America (LatAm), and South Asia. In contrast to FY23, two-wheeler exports from India jumped 35.4 per cent to 4.44 million units in 2021-22 (FY22).
Noting that oil prices had gone down after the BJP-led government came to power in May 2014, before they went up, Prasad said it is a problem whose solution is not in its hands.
Russia and China have a broad consensus today on almost all core issues related to global strategic stability, which is unprecedented in modern history, observes Ambassador M K Bhadrakumar.
Equity benchmarks Sensex and Nifty halted their five-day rally on Tuesday and settled deep in the red, mirroring weak global markets, with decline in index heavyweights Reliance Industries, Infosys and HDFC Bank. Despite opening with gains of over 200 points, the 30-share Sensex turned highly volatile and tumbled 709.17 points or 1.26 per cent to close at 55,776.85. During the day, the benchmark index plunged 1,067.07 points or 1.88 per cent to 55,418.95. The broader NSE Nifty also declined 208.30 points or 1.23 per cent to close at 16,663.
With the international markets facing uncertainty after Russia invaded Ukraine and Western nations retaliated with sanctions, Indian companies are putting their international fundraising plans on hold as they wait for the markets to recover. Bankers said apart from the geopolitical crisis, international rates are hardening in anticipation of interest rate hikes by the US Federal Reserve to control rising prices in the US. The Ukraine situation has implications for the market. In such a situation, international investors try to shift to safe haven assets by exiting from emerging markets.
'The recent correction in indices has made the markets cheaper to invest for the long term.'
The Russian-Ukraine war can hit the global supply chains that are already constrained due to the pandemic and the worst impact will be on ongoing chip shortage because the warring nations brutally control supplies of key raw materials that go into making semiconductors, warns a report. Since Russia controls as much as 44 per cent of global palladium suppplies, Ukraine produces a significant 70 per cent of the global supply of neon -- the two key raw materials that go into making chips. The markets can expect the global chip shortage, that began with the pandemic, to worsen if the military conflict lingers on, says a Moody's Analytics report on Friday.
The US has told India and other countries to cut oil imports from Iran to 'zero' by November 4 or face sanctions.
The virtual meeting between the two leaders came in the midst of some disquiet in Washington over India's position on the Ukraine crisis as well as its decision to procure discounted Russian oil.
After raising interest rate by a cumulative 250 basis points in 11 months, the Reserve Bank of India (RBI) on Thursday unexpectedly kept benchmark rate unchanged as global banking woes added uncertainty to the economic outlook. Five out of six members of MPC voted to remain focused on the withdrawal of accommodation to ensure inflation aligns with target while focusing on growth, RBI Governor Shaktikanta Das said on Thursday. The Monetary Policy Committee of the central bank decided to take a pause after a rate hike seen in previous six consecutive policies.
The Saudi and Iraq offer to replace Iranian crude supplies comes with a catch: Higher prices for the same quality of crude. The new government will face a tough decision over fuel price hike, says Aveek Sen.
The Americans have expended a lot of diplomatic energy to coax India into toeing their line but India has refused to buckle under pressure. As Foreign Minister Subrahmanyam Jaishankar said, India has not taken anyone's side but its own side, points out Virendra Kapoor.
Tightening Russian gas supplies to Europe has led to scramble for tankers before winter sets in.
The US actions can be seen as a riposte to India's neutral position on the Ukraine crisis, its continuing import of Russian arms and oil thus undermining Western sanctions, argues Colonel Anil A Athale (retd).
Foreign portfolio investors (FPIs) pulled out as much as Rs 17,537 crore from the Indian markets in just three trading sessions of March as investors' sentiment got dented by the uncertainty triggered by the Russia-Ukraine conflict and rising crude oil prices. As per depositories data, they pulled out Rs 14,721 crore from equities, Rs 2,808 crore from debt segment and Rs 9 crore from hybrid instruments between March 2-4. This took the total net outflow to Rs 17,537 crore.
Sensex heavyweight Reliance Industries fell 2.76 per cent. In percentage terms, major laggards were Yes Bank, Indusind Bank, RIL, ICICI Bank, HDFC and Axis Bank -- plunging as much as 6.62 per cent.
Russia on Monday accused the US of "actively" exploiting the "contradictions" between India and China to its advantage and asserted Moscow and New Delhi accumulated mutual trust and confidence based on decades-old ties that would help the two sides to deal with the current geopolitical turbulence.
India, which has been at the forefront of the years-long efforts to reform the UNSC, began its two-year tenure at the Council on Friday last.
"No one has ever accused India of supporting what is going on in Ukraine. What India seems to be doing is trying to operate within the policy outlined by Nehru 65 years back," said a source.
India is the second largest buyer of Iranian crude, after China.
Modi on the global stage always comes across as a statesman, counselling peace and amity to world leaders even as his policies at home hurt certain sections, explains Virendra Kapoor.
'Valuations are very attractive, and most companies are cash-rich with strong dividend yields.'
If they can sit together and hammer out 'Black Sea Initiative' deal for much needed food shipments, surely, they should be able to address the madness of the larger military conflict?
