September 10, 2005

Impact of High petrol prices

Have been thinking of how higher petrol prices would affect indian industry. My opinion is that companies like FMCG / IT services / Telecom should not effected much , either due to their inherent pricing ability or because fuel costs are low for them and affect them only indirectly.

The above event should impact oil companies postively ( hopefully they will not go bankrupt). Commodity businesses may get impacted badly if the demand falters and the costs go up. Metals/ Cement / Steel etc could get impacted negatively.

Cant think of the impact on retail / Media and other such industries. They would have some second or third order impact ( less disposable income leading to lower demand ? ) ...

I think the bigger impact could be on inflation and interest rates. I would stay away from fixed income funds for some time atleast. Also individuals with variable rate loans could be impacted. Will it impact the housing market ...not really sure about it

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