How rising price of oil will be effecting the market?

The big story nowadays falling in everyone's mind, Why this oil price hike? And till when? If it continues what's going to happen. Today as on 23rd May 2018 Oil reached at a value of 80$ per barrel, highest since 2014. It matters a lot in a society like India where the population is high consumption of crude oil is one of the basic necessity which cannot be ignored if price keeps on rising like this.

According to an analyst, who predicted that the oil price may touch the height of 100$ per barrel within few months. Reasons can be different but people may be thinking because of low supply of oil from OPEC nations. Also, the withdrawal of the US from Iran nuclear deal might have forced Iran to cut the supply but it does not seem to be a viable reason because if Iran is not ready to supply there are other nations who can take it's place.

The glut of oil in OPEC nations might not be present now and hence supply is low, and our dealers are expecting a high demand which is leading to the price hike.

India will be facing a rise in import bills by 20-30 billion dollars because of this price rise and will ultimately fall on middle-class people. The government will definitely try not to let it fall on people in course of upcoming 2019 Lok Sabha Elections but after that, it will be their call. Although they should lower the excise duty taxes to prevent the hike in the country.

When the Indian economy is at a path of growing with a stable pace, this oil price rise is posing the high risk to growth and inflation rate.

The rupee is also weakening in the forex market due to the higher outflow of the rupee in the market compared with the dollar.

Major companies who will have to bear the brunt will be top FMCGs, airlines and oil refineries which will ultimately cause price rise. Diesel & petrol price will rise, air fares, daily consuming products.

As the rupee is weakening the IT sector and Pharma which have most of their business oversees will be earning higher than expectations but companies like Asian paints, GAIL India will be on the verge of declining share price. India is one of the largest importers of crude oil with an estimate of 3 million barrel oil per day which is also fulfilled by Venezuela which is supplying India China and US. Venezuela faced lots of complaints about their product quality and many countries canceled their orders. RIL, a major consumer of deteriorated oil from Venezuela faced ill-maintained production infrastructure.

These oil price high and weakening of rupee will effect a large number of stocks in the market, Nifty call will change overtime and investors will have to be much careful then before.