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Tough Times

A surge in crude past $80 a barrel and rupee falling towards the 73 level have suddenly become a headache for policymakers.
Aprajita Sharma  New Delhi     Print Edition: October 21, 2018
Tough Times

A surge in crude past $80 a barrel and rupee falling towards the 73 level have suddenly become a headache for policymakers. The stock market has taken note and the Sensex is down 7 per cent this month, the worst September since Lehman. Sino-US trade tensions, upcoming US sanctions on Iran, and a snub by OPEC and Russia to US calls on increasing oil production suggest the two problems are unlikely to vanish anytime soon. When domestic macros were strong, earnings were elusive. Now earnings start to look up, but macros have taken a beating. FPI flows are drying, while mutual funds are seeing a redemption pressure. Defaults at a group, as big as IL&FS, has raised fears of contagion. The bank cleanup process too is delaying things. As such, the sentiment has shifted from greed to fear. This correction is not enough to say it's a buy-on-dip market, unless the picture gets clearer over prevailing issues. Broader valuations are anyway ruling at premium to long-term averages.- Aprajita Sharma

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