Higher crude oil prices will impact corporate earnings, say analysts

The twin tailwinds of low bond yields and cheap crude oil that were driving equity markets in India, despite lacklustre corporate earnings, are now receding.

Crude oil prices have more than doubled from the lows of 2016 pushing up India’s import bill and raising fears of a higher current account and fiscal deficit. A persistently higher deficit translates into a weaker rupee and higher consumer inflation.

Bulls are also facing the heat from a steady rise in bond yields both in India as well as in the US. As a result, the additional earnings potential on equity investment becomes lower,