Crude Oil prices rise 5%. The Asian market is split, investors investigated the problems of Russia and Ukraine, which can affect real estate prices; Is there a long opportunity in India’s stock market?

Crude Oil prices rise 5%. The Asian market is split , investors investigated the problems of Russia and Ukraine, which can affect real estate prices; Is there a long opportunity in India’s stock market?

On Monday, oil futures were up more than 5%, while Asian stocks were split between investors and they kept an eye on the Russia-Ukraine crisis and accompanying sanctions.

Over the weekend, Russia resumed its march into Ukraine, with reports of street fighting and military encircling Kyiv.In Asia trade,U.S. West Texas Intermediate oil futures were up 6.06 percent at $97.14 per barrel.

Brent crude, the International Standard, was up 5.24 percent at $103.06. Last week, Brent broke beyond the $100 barrier, reaching $105 before reversing course. On Friday, both oil contracts ended the day with a loss of more than 1%.

Spot gold, which has historically considered safe haven in times of uncertainty, recently traded at $1,909.61, up 1.17 percent.

China’s mainland markets fell. Shanghai’s composite index dipped 0.14 percent, while Shenzhen’s Component dropped 0.32 percent. The Hang Seng index in Hong Kong fell 1.38 percent.

The Nikkei 225 in Japan fell 0.3 percent, while the Topix was practically flat.
In South Korea, the Kospi recovered 0.11 percent of its losses, while the Kosdaq gained 0.6 percent.

After a brief decline, Australia’s S&P/ASX 200 index rose 0.61 percent.
Outside of Japan, MSCI’s broadest index of Asia-Pacific stocks fell 0.79 percent.Taiwanese markets are closed on Monday for a holiday.

Following Russia’s invasion of Ukraine, global markets were very turbulent last week. Stocks in the United States rose before the close on Friday, but futures are plunging in overnight trade on Sunday.

Over the weekend, Russia resumed its march into Ukraine, with reports of street fighting and military encircling Kyiv.

In response to worldwide condemnation of Russia’s incursion, President Vladimir Putin placed his country’s deterrent forces, which include nuclear weapons, on high alert on Sunday.

The United States and its allied forces announced fresh sanctions and actions against Russia, including the exclusion of several Russian institutions from the SWIFT interbank messaging system.

Many countries have stated that Russian planes will be denied access to their airspace.
According to Ukraine’s Defense Ministry, officials from the Ukrainian and Russian governments have agreed to meet at the Ukraine-Belarus border with “no preconditions.”

Belarus has strong links with Russia, because it shares a border with both Ukraine and Russia.

Currencies
The US dollar index, which measures the value of the dollar against a basket of currencies, was last traded between 96.615 and 97.384.

The Japanese yen was trading at 115.52 yen, up from 115.56 yen, while the Australian dollar was trading at $0.7179 , down from $0.7232.

Impact on housing prices

The current dispute among Russia and Ukraine could affect real estate prices in India. Real estate developers fear that rising geopolitical tensions between Russia and Ukraine will put further pressure on input costs.

While developers expect to have to raise housing prices, they have expressed their inability to specify a specific amount or range because the situation is still fluid, and the final decision will be based on how long the conflict between Russia and Ukraine continues and how other major countries react to it.

While the price of critical raw materials such as cement and steel has been rising for several quarters, developers are concerned that the cost increase this time would have to be passed on to consumers.

Housing income had been convalescing in most important assets markets, attributable to pandemic-pushed focus amongst customers of the want for housing, record-low home loan interest rates, state authorities stamp obligation reductions, and regular pricing and incentives.

Most developers, on the other hand, have not raised home prices in order to prioritise liquidity above profitability.

Oil prices have risen as a result of the geopolitical tensions, while stock markets throughout the world have fallen. Oil fees have risen step by step in current months, as a result of fears approximately interruptions withinside the international deliver chain because of the crisis.

Furthermore, it’d have a poor effect on Indian cement producers, who’re already below strain from growing uncooked fabric and power charges stated Harshvardhan Patodia, head of the Confederation of Real Estate Developers` Associations of India(CREDAI).

Cement producers, he believes, would definitely have to pass on the cost pressure because oil prices affect over 60% of their company directly or indirectly.

Brent crude oil prices rose to $ 105 a barrel for the first time since 2014 after the Russian war in Ukraine caused fears of global oil supply turmoil.

Niranjan Hiranandani, NAREDCO’s National Vice Chairman, also emphasised the link between the likely rise in property prices and the rise in the costs of raw materials used in building, which is directly influenced by oil prices continuing to rise.

Inflation induced by higher petroleum prices has an influence on both the rate of economic growth and consumer morale. Increases in fuel prices have an influence on the cost of raw materials in the supply chain and logistics, resulting in an increase in building costs.

This adds to the difficulties of an already troubled Indian real estate market, affecting liquidity management and, as a result, working cash for project development,” Hiranandani added.

This, he claims, adds to the strain, and if no steps are done to reduce fuel prices, it might render projects unviable and reduce margins.

Industries throughout the economy, including real estate, are hoping that authorities would assure course correction, keep fuel prices under control, and ensure that logistical expenses are in line with costing projections, ensuring timely project development and delivery to end-customers.

Despite the fact that worldwide fears over the Omicron version have abated, the rising demand-supply imbalance has damaged market confidence throughout the world. Crude oil prices play an important role in the growth of any industry, whether or not they are involved in the real estate sector.

While developers expect to have to raise housing prices, they have expressed their inability to specify a specific amount or range because the situation is still fluid, and the final decision will be based on how long the conflict between Russia and Ukraine continues and how other major countries react to it.

How will the rise in crude oil prices in the wake of the Russia-Ukraine situation affect India?

After Russia’s war on Ukraine intensified fears about global energy supply disruptions, oil prices rose on Thursday, with Brent climbing above $105 a barrel for the first time since 2014 before receding.

Brent oil prices hit $105 a barrel on Thursday before retreating to $99.08 a barrel, while West Texas Intermediate, the US contract, hit $100.54 a barrel before closing at $92.81 a barrel, a high not seen in more than seven years.

The rise in oil prices would have an influence on inflation in India, which imports over 80% of its needs from foreign nations.

The Russian invasion of Ukraine will boost the price of petrol, diesel, and LPG cylinders in India, as well as world oil costs.

Brent oil prices surpassed $100 per barrel for the first time since 2014 on Thursday, after Russian President Vladimir Putin’s full-scale military invasion on Ukraine, heightening fears of a global energy supply disruption.

Even as global oil prices soared and financial markets throughout the world fell, the West moved in with further sanctions against Russia for the “unprovoked” strike.

On Thursday, the Sensex, or Bombay Stock Exchange’s Sensitive Index, slid 2,800 points, or 4.72 percent, to 54529.91, while the wider Nifty dropped 815.30 points to 16,247.95.

Supply shortages

Since 2020, when the globe was engulfed by the COVID-19 epidemic, the global oil market has seen declining supplies. When the recovery got underway, global oil supplies were unable to keep up with the unexpected increase in demand.

Because stocks are already low, any significant supply interruption is likely to devastate prices.

Russia is not only the world’s third-biggest oil producer and second-largest exporter, but it is also Europe’s largest natural gas provider. Russia currently supplies 35 percent of the region’s energy.

As the United States, the United Kingdom, and their allies seek to impose more sanctions on Russia, talk is widespread that Russia could retaliate by cutting energy supplies.
Oil prices have already risen in recent months due to supply restrictions. The price of dated Brent, or physical North Sea crude oil cargoes scheduled to be delivered on specified dates, has already surpassed $100 per barrel.

According to The Indian Express, the price of dated Brent, as determined by S&P Global Platts, reached $100.8 a barrel on February 16, the highest level since September 2014.

India’s Reaction

India, a significant oil importer, gets almost 80% of its supply from foreign countries. India bought 43,400 barrels per day (bpd) of oil from Russia in 2021, accounting for barely 1% of its total imports. Meanwhile, GAIL (India) Ltd, a state-owned natural gas company, signed a 20-year contract with Russia’s Gazprom to import 2.5 million tonnes of LNG per year in 2018.

Inflation in India would be affected by the rise in oil prices. The Times of India said that a 10% increase in crude oil will likely boost the Wholesale Price Index (WPI) in India by about 0.9 percent, according to an analysis by the Bank of Baroda.

The US and UK central banks have already declared tightening monetary policies to combat inflation, and the Reserve Bank of India is poised to follow suit this year.

The current account deficit, which is the gap between the values of goods and services imported and exported, will grow as crude oil prices rise.

According to a survey by S&P Global Platts Analytics, a 10% increase in oil prices may result in a $15 billion increase in India’s current account deficit, or 0.4 percent of GDP, according to The Times of India. Both the economy and the stock market will suffer as a result of this.

With the rise in crude oil prices, India’s subsidy cost would grow as well, since it will boost the subsidy on LPG and kerosene.

What effect will it have on consumers?

Consumers will have to pay more for gasoline as crude oil prices rise. Until November 2021, gasoline and diesel prices in the United States reached all-time highs.

The government reduced excise on petrol and diesel by Rs 5 and Rs 10 per litre, respectively, in November, lowering pump costs. A handful of states have similarly lowered their gasoline VAT.

In the national capital, petrol costs Rs 95.3 per litre and diesel costs Rs 86.7 per litre. The cost of jet fuel will rise as oil prices rise, resulting in increased transportation expenses.

Russia launched a full-scale invasion of Ukraine by land, air, and sea, marking the largest single-state onslaught in Europe since World War II.

President Joe Biden of the United States announced further sanctions against Russia, including efforts to limit Russia’s ability to transact in major currencies, as well as penalties against banks and state-owned corporations.

Britain has unveiled fresh restrictions aimed at banks, individuals of Putin’s inner circle, and the ultra-wealthy who live high on the hog in London. Boris Johnson, the British Prime Minister, has stated that the West must reduce its dependency on Russian oil and gas.
After reaching a high of $105.79, global benchmark Brent crude increased $2.24, or 2.3 percent, to close at $99.08 per barrel.

After earlier surging to $100.54, U.S. West Texas Intermediate (WTI) crude increased 71 cents, or 0.8 percent, to end at $92.81 a barrel.
Brent and WTI both touched new highs since August and July of last year, respectively.

Prices fell later in the session when Biden stated that the US is collaborating with other countries on a joint release of extra oil from global strategic petroleum reserves.

The news of reserve releases is “having a psychological impact,” according to Phil Flynn, senior analyst at Price Futures Group in Chicago. “Whether there is a meaningful impact will take a few weeks to ascertain,” he said.

Is it a good time to buy In the midst of the Ukraine-Russia conflict, the situation of  Indian stock market?

The stock market has witnessed unparalleled volatility, and commodities aren’t far behind, with the Nifty down 3.5 percent for the week.

Markets around the world are bloody this week as a result of militant scenarios and geopolitical tensions between Russia and Ukraine. Our leading indices, which were not immune to global concerns, took a hit. As fears intensified, the India VIX reached its highest level since June’20, resulting in a 3.58 percent decrease in the week.

Although everything appears to be going wrong at the moment, the Nifty’s profits success in the most recent quarter is a bright light to ponder as the results season winds down.
Revenues used to measure market resilience were strong, with more beats than Nifty participants’ mistakes. Nifty Parts sales and revenues continued to grow steadily, at double-digit year-over-year levels.

Capital goods, banking, electricity, information technology, and metals are among the industries that performed well, whereas auto, pharmaceuticals, and cement had a difficult quarter. Many firms were hurt by high inflation, which resulted in shrinking margins.

Inflation may climb more in the future, given the current spike in commodities and petroleum prices as a result of the geopolitical environment.

This is arguably a short-term threat to the business and can delay the overall economic recovery. However, the current market slowdown seems short-lived as corporate earnings are stable, management advice is broadly positive across the sector, and India is experiencing significant structural tailwinds. 

While such modifications offend short-term investors, they also offer long-term investors a buying opportunity. This rhetoric is also evident in the fact that DII has absorbed all FII sales from Monday to Thursday this week.

Therefore, investors are encouraged to take advantage of the current crisis and gradually retain quality companies over the long term.

Volatility in the stock market has reached new heights, and commodities aren’t far behind. As a result of the sanctions imposed on Russia, the price of a variety of commodities has soared this week.

Brent crude, for example, has reached $100 per barrel for the first time since 2014, owing to supply constraints and increased demand. Furthermore, because Russia produces 6% of the world’s aluminium and 7% of the world’s mined nickel, signs of tightening supply sent their prices soaring.

Aluminum prices have surpassed all-time highs, while nickel prices are reaching historic highs. Gold prices also climbed to a 13-month high as investors sought a safe refuge to protect their money.

Because these price hikes are only expected to last a few months, it’s crucial to keep a watch on firms that may be directly impacted before making any investment decisions.

However, as global concerns fade, these costs are projected to fall.

Technical Prognosis

The Nifty50 index ended the week on a sharply negative note, dropping below the critical support zone at 16,800 levels. Despite a strong recovery on Friday, the index was unable to regain all of its losses.

In addition, the ongoing main trend has suffered structural damage, making this recovery appear less long-term. As a result, the bounce might be a favourable exit point for short-term traders.

We recommend traders keep a pessimistic attitude till Nifty breaks over 17,500 levels. The levels of immediate support and resistance are presently 16,200 and 16,900.

The week’s expectations

Prevalent geopolitical concerns will continue to take centre stage, with market direction and investor sentiment being influenced by them. Markets may fall much farther into the red if the present confrontation between Russia and Ukraine continues.

In addition, the domestic economic calendar will have an influence on D-Street in the next week, as quarterly GDP numbers, car sales figures, and manufacturing PMI readings are all due.

Given the many trigger points and mounting uncertainty, investors are advised to exercise extreme caution and avoid any aggressive transactions in the short term. The Nifty50 index fell 3.58 percent this week, closing at 16,658.40.

edited and proofread by nikita sharma