- Crude oil prices plunged by ~30% due to oil price war and supply glut as Saudi Arabia plans to raise oil production given the collapse of the OPEC and Russia alliance amid weak oil demand outlook given Coronavirus breakout.
- We expect crude oil prices to remain weak and volatile in the near term until OPEC and Non-OPEC oil producing countries arrive at a consensus on supply cuts.
- India benefits in terms of likely lower current account deficit; fiscal deficit also expected to come down supported by a lower fuel subsidy and scope for hike in exercise duty on auto fuels.
- Fall in oil price is positive for oil marketing companies, lubricant companies, building material, tyres and consumer goods sectors; negative for upstream PSUs (ONGC and Oil India) and gas players such as GAIL (India).
- Preferred Picks:
Large-cap picks - Kotak Mahindra Bank, ICICI Bank, HDFC Life Insurance, Bajaj Finance and HUL
Mid-cap picks - Bata India, Atul Limited, SRF Limited, Divis Labs and Tata Consumer Products