This episode of The Core Report discusses how Indian markets are navigating mixed signals from the US regarding the ongoing war, impacting crude oil prices, the rupee, and economic growth. Experts weigh in on market stability, foreign investment outflows, and the Reserve Bank's interventions, while the government addresses rising costs in the plastics industry through duty cuts.
Summarized by Podsumo
Indian markets are adjusting to the US-Iran conflict, with Morgan Stanley cutting India's real GDP forecast by 30 basis points to 6.2% for 2026-27 due to expected crude oil prices averaging $95/barrel and rising input costs.
The Reserve Bank of India (RBI) intervened significantly to defend the rupee, which was under pressure from record Foreign Institutional Investor (FII) outflows of $12 billion in March, by capping daily open positions and banning offshore trading instruments.
Despite substantial FII outflows totaling $45 billion over the past 18 months, an expert believes Indian market valuations have corrected, and FIIs are likely to return, potentially bringing in $20-30 billion, once global uncertainties and oil prices stabilize.
The government has cut custom duties on a wide range of petrochemicals and polymers to 0% until June 30th, aiming to support the plastics industry which has seen polymer prices surge by 50-60% and faces supply shortages due to the conflict.
Economists suggest strategic measures for the rupee, including attracting NRI deposits with depreciation protection and progressively bringing non-deliverable forward (NDF) market activity onshore for better regulation and price discovery.
"I would strongly believe now that I think worst is now getting behind us of course notwithstanding this particular war even before that the earnings were kind of looking to bottom out and kind of bounce back over the next two years."
— Jay Kotari
"Go in this two step procedure has worked and it worked remarkably well because as you know instantly the rupee jumped up by something like 1.5% which is a very big jump in last 12 years and it is a crisis situation."
— Dr. Ajit Rana De
"This kind of steep price rise of 50% or 60% is not possible. So they have to pass on."
— Sunil Shah