New Delhi is bracing for a potential profit squeeze on corporate India as soaring crude oil prices ripple through the economy. A fresh report from Kotak Institutional Equities warns that prolonged conflict in the Israel-Iran theater could spike input costs across multiple sectors, eroding earnings in the coming quarters.
The brokerage’s analysis paints a stark picture: if the Middle East flare-up extends beyond a few weeks, businesses heavily reliant on oil and gas will face mounting pressures. India’s voracious appetite for imported crude—meeting over 85% of its needs—leaves it acutely vulnerable to global energy shocks. This vulnerability could balloon the current account deficit, casting a shadow over macroeconomic stability.
Investor sentiment has already taken a hit. Foreign institutional investors (FIIs) offloaded shares worth Rs 3,752.52 crore on Thursday, spooked by escalating geopolitical risks. Yet, domestic players stepped in robustly, pumping Rs 5,153.37 crore into equities, providing a vital buffer.
Kotak highlights that while steady local investments and India’s medium-term growth story offer some respite, the near-term outlook remains precarious. ‘The key downside risks for markets include disruptions in Middle East oil/gas supply and a protracted crisis,’ the report cautions.
Aviation, logistics, paints, tyres, and petrochemicals are among the hardest-hit sectors, where elevated fuel costs could swiftly translate into slimmer margins. Economists note that every $10 rise in Brent crude adds significant strain to India’s import bill, potentially fueling inflation and prompting tighter monetary policy.
As markets navigate this turbulence, all eyes are on diplomatic efforts to de-escalate tensions. For now, corporate leaders are urged to hedge risks and recalibrate strategies in this high-stakes energy landscape.