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August 2016

Commodity price risk

By Tarunkumar G. Singhal, Raman Jokhakar; Chartered Accountants
Reading Time 1 mins
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Traditionally, higher oil and commodity prices were seen as negatives for global equity markets, but the relation has been more positive in recent times. One reason for this could be that movement in commodity prices— particularly of crude oil—is now seen as an indication of demand in a world that is struggling with feeble economic growth.

It will be interesting to see how things pan out from here as commodity prices are said to have bottomed out and have rebounded considerably from their recent lows.

Since India benefited significantly from lower oil and other commodity prices, investors will be keenly watching the movement as some of the gains could come under pressure. The Reserve Bank of India’s latest monetary policy statement flagged the risk of firming commodity prices. Further increase in prices could not only affect possibilities of monetary accommodation, but also impact margins and earnings in the corporate sector.

(Source: Quick Edit in Mint Newspaper dated 10.06.2016)

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