Can higher oil prices be a spoilsport for Indian equity market?

Brent crude price is nearing $84 a barrel. WTI is nearing $80 a barrel. Can this be the spoilsport for the Indian equity markets?
History shows that whenever crude oil prices have gone up, equities have also gone up simultaneously and whenever they have fallen thereafter, equity has also corrected itself. If that has to be validated, then we are unlikely to see a fall in the market. However, the important aspect would be the economic impact. The economic impact for India in particular is extremely serious because of high raw material prices due to the high energy costs and crude is responsible for that.

The economy’s cost structure is getting into a real good amount of challenge. In my viewpoint, it is a matter of time before global majors come together and start asking the oil producing countries to start increasing the production of crude oil and cool down the prices. The entire crude oil rally in the current system came largely after April 2020 wherein most of the oil producing countries cut down production.

The demand for crude oil is growing but it is not growing at a very high speed. At the same time, due to the supply constraints, crude oil prices have remained firm. World majors would probably come together, cool down the prices of crude oil and eventually cool down the prices of other commodities. That is going to be the play that is likely to be seen but as of now, many companies will be experiencing the higher cost structure in particular in the second half of the financial year.

Till the first half, most of the guys would have a higher amount of inventory carried into their balance sheets. I guess the real impact of cost pressure would come in the second half of the financial year. Some of the businesses will have to be watched very carefully in this particular period. So demand may not be affected immediately, but cost pressures would come into play.

How should one play this theme on the stock markets? JP Morgan has made a case about how the EM equities median return was plus 19% and it outstripped the developed markets as well.
Yes it is and as I said, whenever crude oil prices have gone up in the past. India in particular has done better. Due to higher crude oil prices, all commodity prices increase and that results in better corporate profits for those companies which are into commodity play and that is the reason we are seeing the market rallying in this situation.

But as I also said, the consuming industry of the commodity and particularly energy businesses are going to be affected with the margin. In my view, many of these businesses where the…