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Rs 1 trillion money manager says [email protected] 105 not all that bad

NEW DELHI: Rising crude oil prices coupled with higher taxes have driven petroleum prices in India to record highs. Vital commodity petrol is trading in the upwards of Rs 100 across many cities in the country.

While there has been an outburst against rising fuel prices among political opposition and consumers, DSP Mutual Fund, which manages more than Rs 1 lakh crore in assets, sees a silver lining. The fund house says this will aid exports.

“Higher oil prices may not be all that bad, at least until they aren’t hurting. In reality, higher oil prices are consistent with higher exports from India. Refined petroleum products are the highest single item export for India, as is for more than two-thirds of the nations globally,” said DSP Mutual Fund.

“The narrative on oil prices in India is usually static. Higher oil price creates a lot of noise about the burden on consumers. India’s fascination with higher exports is also a consistent ask for decades,” it said.

The analysts at the fund house noted that there is an eerie similarity between India’s merchandise exports and crude oil prices: when curves for both indicators are plotted, they seem to move in tandem.
Meanwhile, the breakdown of Opec+’s meeting on production levels has left the oil market in limbo. Crude oil prices have surged to $77 a barrel, which will further raise fuel pump prices in India, especially when the government has not shown any intent to cut taxes.

Time to buy auto stocks?
India is getting more mobile and the auto sector has grown at a good pace in the last five years, barring some hiccups last year. But relatively, it seems the growth has lagged other sectors, especially in the stock market.

The auto & auto ancillary sector has been an underperformer for the last five years and its market-cap share in the total market is falling. But the sector tends to outperform Nifty in most upcycles, said DSP Mutual Fund. “Can it repeat the same? If it does, it will be quite an opportunity,” it added.

DSP-auto

So should you buy stocks from the sector? Well, the jury is divided there. Some feel a few strong names like are good ‘buying’ options at current prices, while others have asked investors should avoid the sector. A few are in a ‘wait and watch’ mode, as they believe the sector is primed for a disruption due to electric vehicle adoption.

“Lifting of Covid curbs, revenge purchases and mobility trends added with the return of discretionary consumption could help the auto sector score a big win over the next few years,” said DSP Mutual Fund.

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