Rising crude oil prices are causing significant worries in financial markets, according to a market expert. The expert, Shrikant S. Chouhan, Head of Equity Research at Kotak Securities, highlighted that inflation fears, higher bond yields, and foreign fund outflows are putting pressure on equities. He emphasized that as long as crude oil prices remain high, concerns about inflation will persist globally.
Chouhan pointed out that the surge in bond yields, particularly in the United States, is a result of persistent inflationary pressure. Last week, US bond yields across various maturities experienced a notable increase, moving towards exceptional levels. This trend tends to attract substantial investments to bond markets.
The expert explained that the higher returns in developed market bonds lead to capital outflows from emerging markets like India. This shift occurs as global investors seek safer debt instruments in countries such as the US and Japan. Due to these global challenges, Indian equity markets are expected to remain range-bound in the short term.
Chouhan also discussed the impact of foreign institutional investor (FII) activity, attributing persistent selling by overseas investors to increased global uncertainty and elevated crude oil prices. He warned that if crude prices continue to hover around $105-$110 per barrel, the repercussions could intensify for the global economy. Additionally, he highlighted that higher crude prices are adversely affecting currencies worldwide, particularly in emerging economies reliant on energy imports.
The combination of expensive crude oil, rising bond yields, and ongoing foreign fund outflows is creating a tough environment for equity markets globally, including in India, as per Chouhan’s analysis.
