New Delhi is bracing for a profit squeeze as soaring crude oil prices ripple through corporate India. A detailed report from Kotak Institutional Equities warns that prolonged conflict between Israel and Iran could drive up input costs across multiple sectors, eroding company earnings in the coming months.
The analysis highlights how elevated oil and gas prices pose a direct threat to the broader economy. India’s heavy reliance on imported crude—meeting over 85% of its needs—makes it acutely vulnerable to global energy shocks. This vulnerability could widen the current account deficit, fueling inflationary pressures and dampening growth prospects.
Market sentiment has already taken a hit. Foreign investors offloaded shares worth ₹3,752.52 crore on Thursday, spooked by escalating Middle East tensions. Yet, domestic investors stepped in with ₹5,153.37 crore in purchases, providing a crucial buffer to equity markets.
Kotak’s report underscores the key risks: supply disruptions in oil and gas from the region, coupled with a conflict dragging beyond expectations. While India’s medium-term growth story and steady local investments offer some support, geopolitical developments remain the wildcard to watch closely.
As corporates grapple with higher costs in manufacturing, logistics, aviation, and chemicals, the report calls for vigilant monitoring. Prolonged high prices could cascade into weaker revenues, testing the resilience of India’s corporate sector in an already uncertain global landscape.