Brent oil price plunges 18% this week: Stock market impact, stocks to watch

Brent crude oil futures for January delivery have plunged 18 per cent this week amid the outcome of the US midterm elections and hopes of US-Iran peace talks, potentially benefiting crude and crude derivatives-linked sectors such as aviation, paints, oil marketing companies (OMCs) and chemicals.

InterGlobe Aviation Ltd (IndiGo) from the aviation sector; oil marketing companies such as Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation Ltd (IOC); tyre makers such as MRF Ltd and CEAT Ltd; and paint makers such as Berger Paints and Asian Paints Ltd will be in focus.

In a rising oil price scenario, OMCs face pressure if domestic fuel prices do not adjust, while aviation, paints and other crude-linked businesses remain vulnerable to higher input costs, said ASK Investment Managers. Upstream producers, in such a scenario, are relatively better placed. The key test usually remains on whether companies can pass on costs without weakening demand.

Data showed crude futures slipped 1.01 per cent to $93.66 a barrel on Thursday, following an 8.67 per cent decline on Wednesday. Crude oil fell 1.12 per cent on Tuesday and 7.63 per cent on Monday, taking its cumulative decline this week to 18 per cent.

"Following the US midterms, the bargaining positions of the US and Iran in peace negotiations may reverse, with Iran becoming more willing to negotiate," Nomura said in a note.

Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, said the war premium had been removed from crude prices amid signals that political pressure could push the US administration towards negotiations with Iran.

"Unlike the earlier gradual decline, the magnitude of this move can materially improve India’s near-term macro and earnings outlook if sustained. However, the fall remains driven by expectations rather than a confirmed settlement or full restoration of energy flows, leaving crude vulnerable to any setback in negotiations," he said.

Ponmudi R, CEO of Enrich Money, said the decline offers some relief to an oil-import-dependent economy such as India, potentially easing pressure on the import bill, domestic inflation and the current account deficit. "A sustained moderation in energy prices could also improve the broader macroeconomic outlook and strengthen investor appetite for domestic equities," he said.

Radhakrishnan said the combination of lower yields, falling crude and improving risk appetite is more constructive for India than a yield decline caused solely by flight-to-safety demand. "Sustained moderation in both variables could support foreign flows and extend the domestic re-rating beyond the opening gap," he said.