Crude oil prices are trading in the green for the second straight day. However, it remained below $100. Brent crude futures are trading below $93 per barrel, the lowest since February as mounting risks of a global recession and a potential boost in Iranian supply more than offset a larger-than-expected decline in US crude inventories.
WTI crude futures were trading at around $88 per barrel on Thursday. Global crude oil prices have corrected by almost 31% from a high of $136 hit on March 07, 2022.
Low crude oil prices will reduce India's inflation and also lower pressure on the current account deficit, given that India imports more than 80 percent of its crude oil needs.
As per Trading Economics, the EU said on Tuesday that it was studying Iran’s response to a "final" draft agreement on reviving the 2015 nuclear accord, and analysts said that a potential deal could unleash about 2.5 million BPD of Iranian crude on the global markets.
Investors also continued to grapple with the risk of a global economic slowdown that could heavily impact energy demand, with major central banks set to raise interest rates further to bring down inflation. Meanwhile, an industry report showed US crude stockpiles fell by 448,000 barrels last week compared with market forecasts of a 117,000-barrel drop. Trading Economics reported.
As Mint reported, analysts believe that Brent prices may remain volatile but will likely stay below $100 a barrel due to muted demand and expectations of more supplies.
Rupee and bond prices have strengthened
Low crude prices have boosted the rupee and bonds. The Indian rupee closed at 79.45 against the US dollar on Wednesday. The yield on the 10-year Treasury note fell 10 basis points to 7.18 percent, down from 7.28 percent at the previous close. Both bond yields and prices move in opposite directions.
Goldman Sachs stated that Indian government bonds may be added to the global index next year, Bloomberg reported.
The nation’s sovereign bonds may be added to JPMorgan’s GBI-EM Global Diversified Bond Index with an initial 10% weightage, analysts Danny Suwanapruti and Santanu Sengupta wrote in a note to clients.
In addition, the Indian equity markets gained on Wednesday, with the BSE Sensex hitting its highest level since April 05 on the back of easing inflation and inflows by foreign portfolio investors.
The Sensex ended with a gain of 418 points, or 0.70%, at 62,260.43, while the Nifty closed at 17,944.25, up 119 points, or 0.67%. The BSE Midcap index closed 0.64% higher while the small-cap index rose 0.53%. The Sensex is now just 3% below its all-time high of 62,245.43, which it hit on October 19, 2021.
FPIs are back
FPIs invested ₹22,452 crore in the first two weeks of August. This was significantly higher than a net investment of nearly ₹5,000 crore by Foreign Portfolio Investors (FPIs) in the entire month of July, according to PTI, citing depositories data.
In addition, FPIs poured a net amount of ₹1,747 crore into the debt market during the period under review.
FPIs turned net buyers for the first time in July, after nine straight months of massive net outflows, which started in October last year. Between October 2021 till June 2022, FPIs sold ₹2.46 lakh crore in the Indian equity markets.
Inflation in the United States fell from a 40-year high in June to 8.5 percent in July, owing to lower gasoline prices. This has convinced investors that the US Federal Reserve will not go in for aggressive rate hikes.
Meanwhile, retail inflation in India fell to 6.71% in July from 7.1% in June, decelerating for the fourth consecutive month. However, the CPI has breached the upper limit of the RBI target range of 2–6% for the seventh consecutive month. Falling inflation also fueled buying sentiments in FPIs.
The July reading slightly eased concerns that the RBI will not go on aggressive rate hikes. So far this year, the Reserve Bank of India has raised interest rates by 140 basis points, to 5.40%.
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