HSBC has issued its second downgrade for Indian equities in a month citing the impact of the oil crunch caused by the war in the Middle East on the Asian powerhouse.
“India now looks less attractive than North East Asian peers in the current macro setting,” the bank’s analysts said in a note today, as quoted by Reuters. They added that oil and gas supply was expected to remain tight during the second and third quarters of this year, extending pressure on Indian corporates.
Brent crude has gained 42% since the United States and Israel first struck Iran at the end of February. The international benchmark this week again topped $100 per barrel amid a diplomatic stalemate between Tehran and Washington and reports of tanker seizures and a renewed closure of the Strait of Hormuz.
India is the world’s third-largest oil importer and depends on imports for over 85% of its consumption, which makes its economy especially vulnerable to the negative effects of oil shocks.
In the latest evidence of this vulnerability, India’s crude oil imports sank by 13% in March from February as the Iran war crippled Middle Eastern supply that couldn’t be offset by record-high Russian oil imports.
India imported a total of 4.5 million barrels per day of crude in March, down by 13% from pre-war levels, according to shipping and industry sources’ data cited by Reuters earlier this week. Middle Eastern supply to India plunged by 61% to 1.18 million barrels per day last month, while Russian supply almost doubled from February to 2.25 million barrels per day in March, thanks to the U.S. waiver on purchases of Russian crude that’s already loaded on tankers.
India’s Russian crude imports are set to remain at near record-high levels in April, too, after the U.S. Treasury Department this weekend extended the waiver for an additional two weeks until mid-May.
By Irina Slav for Oilprice.com
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