India Inc will be delighted with the election results at a time when the global recession shows little signs of abating and the need for a strong, stable government at the Centre becomes imperative.
One segment which has kept its fingers crossed about the future is the oil sector and, in particular, the public sector companies. Thanks to a pricing policy that is still in favour of subsidies and just refuses to acknowledge the need for a free market, these jewels of India’s crown, aptly christened navaratnas, have had a rough deal over the years.
For the sake of argument, take a look at the global oil front… economic recession has slashed drilling investment in non-OPEC nations, fanning a “fear-of-the-future” mentality among many traders that crude supply will once again tighten as the economy recovers. Fewer non-OPEC barrels down the road will bump up the world’s reliance on OPEC crude, which currently supplies about four in 10 barrels consumed daily worldwide. Although still relatively weak, oil prices are up about 35% since two months ago. Saudi Arabia, the cartel’s largest producer and the only OPEC nation in the G20, has added incentive to keep production steady because it doesn’t want to be seen spoiling the G20’s big stimulus plan for the ailing world economy, announced in April, by backing measures that could sock consumers with higher oil prices. Millions of consumers globally are still struggling with sharp reductions in personal wealth, large debts and rising job losses that have yet to bottom out in many nations.
Some indications trickling in :
1.Oil down on weaker equities
2. Fuel price hike boosts oil PSUs
Last fiscal was possibly the most trying in recent times as global crude prices spun out of control and compensation from the Indian government (for losses incurred on sale of subsidised fuels) took a little too long in coming. Will this year in the required tonic into the sector with a positive outlook to stable governance in India as well as recessionary global winds receding slowly ? I am going to wait-and-watch until the my next blog….to agree or disagree on my own argument.