MS -: Soft commodity prices: +ve for macro, -ve for sectors Soft commodity prices: +ve for macro, -ve for sectors Recent volatility in global commodities may shake-up our macro/sector base case estimates. Our three key takeaways are (1) 4-5% downside in our full-year corporate earnings, (2) lower commodity prices are positive for inflation and fiscal deficit and (3) E&Ps, OMCs, refineries, would face major brunt from commodity prices volatility. With the intensity of political risk abating, market focus will now shift towards potential damage to corporate margins and earnings from floods and volatility in commodity prices, in our view. While the impact on trade deficit may be muted as oil import gains are likely to be mitigated by adverse impact on textile exports, an average 10% change in petroleum product prices directly impacts inflation by 30bp Our conviction on underweight stance on OMCs, textile and consumers receives further support from volatility in commodity prices. Cement, banks and E&Ps remain our favored sectors.#Kasb
Posted on: Mon, 15 Sep 2014 17:45:24 +0000
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