Sensex Ends 580 Points Higher; Auto And Metal Stocks Witness Buying

India's Increasing Crude Oil Demand Supply Gap

 

The worrying factor is this was the lowest production this year.

Here's what Tanushree Banerjee wrote about it in a recent edition of The 5 Minute WrapUp...

  • Comparing domestic production with the crude oil processed by refineries gives an idea of the demand supply gap. Low domestic production as compared to the demand for crude oil places a huge burden on India's import bill.

    Rising crude oil prices could have severe implications. Rising inflation. Rising interest rates. Pressure on the government to cut excise duty, thereby impacting its revenues.

    We have seen some of this play out. With elections around the corner, expect a lot of subsidies on fuel prices. This is bound to worsen India's fiscal deficit further.

It would be interesting to see how this pans out. Meanwhile, we will keep you updated on all the developments from this space.

Moving on, airline stocks witnessed buying interest today. Gains were seen on the back of falling crude oil prices today.

Stocks such as SpiceJetIndiGo, and Jet Airways gained as much as 5% on the back of above development.

Speaking of airline sector, India's aviation industry is on a high-growth trajectory. India's domestic air traffic has seen a prolific growth of 20-25% during 2015 and 2016. And in 2017, it tapered to 17.4%. However, for the first time, domestic air traffic crossed an important landmark of 100 million passengers in a calendar year.

What's foreseeable for India's aviation traffic now is some pressure on the back of the consistent rise in crude oil prices.

Oil prices are closely monitored by the Indian air carriers, as aviation turbine fuel is their single largest input cost. A sharp rise in the cost of fuel puts pressure on margins, and consequently an increase in air fares.

Although air travel is becoming the new normal, investors need to understand the industry dynamics before buying up aviation stocks.

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