Volatile Oil Won’t Derail India Outlook If It Stays Below $70, Says Arvind Sanger
The market is counting on a revival in Indian economy in fiscal 2020-21, Geosphere Capital Management’s Arving Sanger says.
A volatile crude will not derail India’s economic outlook, and expectations of a revival in the coming quarters, as long as oil prices remain below $70 per barrel, according to Geosphere Capital Management’s Arving Sanger.
A global bull market case can be made for equities if oil prices don’t rise to “damaging” levels, the managing partner at the advisory firm told BloombergQuint.
Oil prices crossed the $70-a-barrel mark on Monday—a seven-month high—amid escalating U.S.-Iran tensions in the aftermath of Iranian General Qassem Soleimani’s assassination. The prices, however, stabilised around $68 a barrel Tuesday morning.
But stable oil prices, according to Sanger, aren’t the only prerequisite for the Indian equity market, which is already close to its all-time high of 12,293.90, to perform well. “What we really need is a meaningful economic rebound from extremely weak last several quarters,” he said. “And for that we need to see business confidence come back.”
The market is counting on fiscal 2020-21, Sanger said, adding the budget will also help in pulling the economy out of the “deep dive”seen in 2019.
India’s GDP growth fell to 4.5 percent in the July-September quarter—the lowest in more than six years. The Reserve Bank of India also lowered its growth forecast for 2019-20 to 5 percent from 6.1 percent on account of a continued consumption slowdown in the country.
Fitch Ratings too cut its India growth forecast for the ongoing financial year even but expects a revival in FY21 with support from easing monetary and fiscal policy, and structural measures by the government.
Sanger, however, said the geopolitical tensions were only a near-term risk to the markets. “The hope that we can have as an optimist perspective is that President Trump is sabre-rattling but at the end he is very sensitive about economic growth and this is an election year for him and its important for him not to derail the U.S. or global economies,” he said.
“My sense would be that there will be attempts to ratchet back tensions.”
Watch | Arvind Sanger On Impact Of Volatile Crude On Indian Equities