Crude Oil on a boil...

Regime changes in Egypt, Tunisia.
Popular rebellion in Yemen, Bahrain, Libya..
Smoldering discontent in Oman, Saudi and Iran...
Commodity speculators in search of a killing to make from fear....
Brent @ USD 116/barrel, WTI Crude @ USD 101/barrel.....

Oil has been on a boil last few weeks. This post tried to measure the impact of Oil on Indian Economy sector-wise:

1] PRIVATE REFINERS: RELIANCE, CAIRN ENERGY, ESSAR OIL : Positive, GRM's will increase

2] PSU UPSTREAM, OMCs: -ve, OIL, GAIL, ONGC will lose 2 ways - increased subsidy burden, but no increase in realised profit due to fixed rate of Crude obtained from OMCs.

3] Indian IT: +ve, Higher Crude prices should cause a widening of CAD and currency depreciation which will improve margins (so long as developed markets don't slow down tech spending suddenly). +ve for INFOSYSTCH(INFY), WIPRO(WIT), TCS, (CTSH), HCLTECH etc

4] Financial Services: - ve, Higher crude will push up inflation necessiating interest rate hikes, impacting NIMs and affecting equity flows, hence the brokerage side of equity business. Higher GOI bond requirement will drive down yields impacting MTM values of held securities, Increase in NPAs

5] Infra: -ve, Rate hikes, rising cost of raw materials and labour cost spike (due to rise in basic living cost of workers) will impact margins and bankability of new projects

6] Telecom: NEUTRAL. Lower disposable income might imply drops in ARPUs and interest costs(most indian telecom companies are burdened with debt for n/w rollout and 3g). However, overall impact is much lower than other sectors. +ve on BHARTIARTL which has signficant non-India business

7] Metals Mining and Commodities: NEUTRAL, Speculating that metals cost will go up in tandem with Crude Oil, hence slightly +ve, however labour and RM , Transportation costs will go up significantly

8] TRAVEL, CARGO, TRANSPORTATION, LOGISTICS, HOSPITALITY: Big -ve as costs are largely in direct correlation to crude and competition is hugh, so scope for margin retention is low. Particularly -ve for airlines JETAIRWAYS, DECCANAIR, SPICEJET

9] REAL ESTATE & Construction: Costs to go up, landbanks already purchased at very expensive valuations in recent times. -ve for entire RE lot. DLF, UNITECH, HDIL etc and any other RE that I might have missed. Esp -ve where D/E is already high and company is not listed, awaiting favourable conditions for IPO


Basically, largely -ve. Time for India to launch NELP IX in a big way and try to benefit. For common investors, wait for a carnage and then invest when valuations are right

My current stock preference on a market correction:
(For the adventurous): Puts in early phase of the fall, CALLS when mkt is close to 4900-500

(For the common man i.e. me)
LnT, IRB From infra space for the long term
REC, SBIN, ICICIBANK from Financial Services
COALINDIA in Energy, (Buy ONGC on the FPO, hopefully with a further 5% retail discount)
As usual : No comments on the IT segment esp. Large Caps.

PS: These do not constitute financial advise. Please use your common sense before investing -> If I'd be rich advising on financial matters, I wouldn't be writing this for free.

PS2: Yes, I am heavily invested in the mentioned stocks