Most of the profit growth right now is coming from oil and commodity companies, which benefit from high crude prices but typically trade at lower valuations. Technology stocks have also fallen out of favour on concerns about artificial intelligence (AI) disrupting the sector, and large private banks have lost ground as competition from state-owned lenders has intensified.
Prasad is pricing in petrol and diesel price hike of at least another ₹7 per litre before the end of June.
“The OMCs are losing roughly about 24,000 crore per month,” Prasad said. “If you divide that by total consumption on a monthly basis, you get to about ₹20 per litre loss, which they are bearing for now.” That bleeding cannot go on forever.
The government has already tried to soften the blow, cutting a special fuel tax and raising retail prices by ₹3 per litre recently. Together, that amounts to around ₹13 per litre in relief. But with losses still running at ₹20 per litre, the shortfall remains large, and the pressure to act is building.
A hike, however, is not without consequence. Higher fuel prices push up the cost of transport, food, and goods across the board. “Somewhere the government has to manage between pressure on the fisc versus pressure on inflation, and some pain for the households. It’s not an easy task,” Prasad said. The government, for its part, has called reports of an imminent hike “fake news.” But with OMC losses mounting, analysts say the question is when, not if.
Watch the full conversation here
Also Read | ‘Buy the dip’: Edelweiss AMC CIO says India market selloff may be overdone
For investors looking for safer ground right now, Prasad points to a handful of sectors. He likes select private banks, particularly HDFC Bank, which he says looks reasonably priced. He also sees value in telecom companies and certain pharmaceutical firms, which tend to hold up better when the broader economy is under stress.
Foreign investors remain a concern. They have been pulling money out of India and putting it to work in markets like Taiwan and Brazil, where the returns have been far higher. India’s share of a widely tracked emerging market index has slipped to around 12%, while a single Taiwanese chipmaker now carries more weight in that index than all Indian companies combined. Prasad’s suggestion to bring foreign investors back — removing capital gains tax on their Indian investments — is modest, and he admits it is unlikely to turn the tide on its own.
Also Read | Bond market may force the Fed to turn hawkish again: Ed Yardeni
The one bright spot is ordinary Indian investors, who have kept putting money into mutual funds and monthly savings plans even as returns have been disappointing. But Prasad flags a risk: since mid-2023, those investors have made roughly 5% on their money — barely more than a fixed deposit. “How long will they keep faith in the market, which has given them hardly any returns in the last two years?” he asked.
Catch all the latest updates from the stock market here
