Indian markets fragile amid geopolitical tensions, says Kotak Securities

Market Fragility and Geopolitical Risks

India's markets are facing significant headwinds amid escalating geopolitical tensions, with crude oil prices surging and supply chains under threat. Sumit Pokharna, VP-Fundamental Research at Kotak Securities, says the situation is "very fragile" and could persist for weeks.

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While speaking to ANI, Pokharna said, "The current environment is very fragile, the geopolitical risk has re-emerged significantly. This risk can sustain for a few more weeks; we don't know that. India is importing more than 80% of its crude oil requirement from abroad, and that makes India very fragile compared to other countries. So, our dependence is very high. Any disruption in the supply side will lead to major disruption in the GDP growth."

Expert's Outlook and Advice

Pokharna stated that multiple risks are converging, such as high crude oil prices, increased freight costs, higher insurance, and supply-side disruptions. "Markets don't like uncertainty," Pokharna said. The trend may continue until geopolitical tensions ease. He suggests looking for quality stocks in pockets with strong earnings where there might be an overreaction.

"Secondly, there are multiple risk which has emerged - high crude oil prices plus higher freight caused higher insurance and then on top of it, the disruption on the supply side. So, the market doesn't like uncertainty, and that is why we have seen the market correcting significantly in the recent past. Can this trend continue? We don't know; till the time there is a resolution coming in the geopolitical side. But this is a worrisome situation right now and one should be very selective in buying stocks. There can be an overreaction in certain pockets and when there is an overreaction, the earnings are strong out there, then one can look for buying quality stocks at such pockets," he added.

Government Assures on Energy Preparedness

Earlier on Tuesday, following the outbreak of hostilities in the Middle East and the evolving global energy situation, Hardeep Singh Puri, Minister of Petroleum & Natural Gas, informed that "the country is well stocked with crude oil and inventories of key petroleum products including petrol, diesel and ATF to deal with short-term disruptions arising from the Middle East."

In a media briefing, the Minister provided an update on the country's preparedness in the current circumstances. It was highlighted that India is the third largest importer, fourth largest refiner, and fifth largest exporter of petroleum products globally.

It was further apprised that in the last few years, India has ensured both availability and affordability of energy for its population by diversifying its sources. Indian energy companies now have access to energy supplies that are not routed through the Strait of Hormuz. Such cargoes will remain available and help mitigate supplies that may be temporarily affected enroute through the Strait of Hormuz. (ANI)