$100 crude unlikely to derail India investment case, says Ionic strategist

Harsh Gupta Madhusudan, Chief Equity Strategist at Ionic Asset, argues that while Brent crude oil exceeding $100 a barrel could cause short-term volatility for India, it does not justify abandoning an investment in the economy. Higher energy costs may increase earnings pressure and currency depreciation, yet these factors are expected to be less severe than anticipated due to strong growth fundamentals and favorable external balances. Gupta projects the Indian rupee will stabilize around $96-$97 in the immediate term because the Reserve Bank of India defends that range. He expects appreciation over the next 12 to 18 months, driven by a significant fall in real effective exchange rates over three decades and substantial foreign currency reserves. The strategist notes that capital inflows should return quickly even if the rupee only stabilizes on a rolling basis. Global yields remain elevated and geopolitical risks persist, but the current account surplus excluding gold provides sufficient buffer against downside shocks.