Why India is more exposed than other emerging markets
Speaking to ET Now, Sunil Subramaniam, a veteran market strategist, explained that India’s vulnerability stems from a combination of factors that other Asian economies don’t face with the same intensity. “India imports 85% of its crude oil,” he noted. “That makes every dollar rise in oil prices disproportionately painful.”
Compounding the supply-side pressure is the collapse of the Russian oil discount. Throughout the Russia-Ukraine conflict, India had benefited from below-market crude purchases from Russia. That advantage has now evaporated — Russia is reportedly seeking a premium over international prices. On top of that, insurance and transportation costs for tankers have surged by as much as 400%, further inflating the landed cost of every barrel reaching Indian refineries.
A strengthening US dollar — the DXY index touching 99 — is adding another layer of pain. As FIIs rotate capital out of emerging markets back into US Treasuries, the rupee weakens further. A weaker rupee means that even if global crude prices stabilise, India still pays more in domestic currency terms. It is, as Subramaniam put it, “a double whammy.”
ETMarkets.comThe four economic consequences markets are pricing in
Subramaniam outlined four distinct channels through which sustained high oil prices — anything above $100 per barrel lasting a month or more — would ripple through the Indian economy.
First, the trade and current account deficit. If Brent remains above $100, India’s current account deficit could widen by 1.8–2 percentage points — a significant fiscal deterioration that would further pressure the rupee and government finances.
Second, the government faces a difficult three-way decision on how to absorb the shock: it can pass the cost on to consumers (fuelling retail inflation), cut excise duties (widening the fiscal deficit), or force oil refining companies to absorb the losses. Each option carries a significant political and economic cost.Third is the impact on oil and gas companies themselves, which may be forced to accept margin compression if the government resists passing on full price increases. Investors in energy stocks are re-evaluating earnings estimates accordingly.
Fourth — and most consequential for long-term investors — is the drag on GDP growth. Subramaniam estimates that a sustained oil price shock of this magnitude could shave 30 to 50 basis points off India’s GDP growth rate — a meaningful deceleration for an economy already navigating global headwinds.
Can Russian crude save India on price? Experts say no
A 30-day waiver granted by the White House on Russian oil imports offers some relief on the supply side — India will not face a shortage of crude in the near term. However, Subramaniam was clear that this does nothing to address the price problem.
Russian oil, while still accessible, now comes with a premium pricing structure, elevated shipping costs due to the rerouting of tankers via the Suez Canal (bypassing the Hormuz Strait), and insurance surcharges that have ballooned. The cost relief that India had come to rely on has essentially disappeared.
FII positioning: Cash selling plus a derivatives bet against India
Beyond the ₹6,000 crore cash market outflow, Subramaniam flagged a more concerning development in the derivatives segment. FIIs and short-term hedge funds have built up significant short positions across Nifty futures, Bank Nifty futures, and individual stock futures. This positioning suggests that institutional money is not merely exiting — it is actively betting on further declines.
“It is a sell-India-on-rise posture,” he said. “It’s not just cash positions — the futures and options market is in deeply negative territory from an FII perspective.” This combination of spot selling and futures shorting creates a feedback loop that can accelerate market declines during periods of volatility.
What should retail investors do right now?
Amid the market noise, Subramaniam offered a structured, historically-grounded playbook for ordinary investors. His advice was notably different for traders versus long-term investors.
ETMarkets.comThe geopolitical wildcard: Will the conflict escalate?
On the geopolitical outlook, Subramaniam was not optimistic about a quick resolution. The US-led coalition, he argued, is unlikely to withdraw before declaring some form of victory — meaning elevated oil prices could persist for longer than markets currently anticipate.
He also noted internal tensions within the coalition, pointing to visible friction between the US and Israel over the targeting of oil facilities. While Washington had explicitly limited its objectives to nuclear sites, ballistic missile facilities, and naval and air force infrastructure, Israeli strikes on refineries have created diplomatic friction. However, Subramaniam cautioned against reading too much into any single statement from political leaders: “His tweets have a life cycle of about 30 minutes,” he said, referring to the unpredictability of US political messaging on the conflict.
For now, markets appear to be positioning for a prolonged period of uncertainty. Whether that risk premium ultimately proves to be an overreaction — as it often has in previous geopolitical crises — will depend on how quickly diplomatic channels can contain the conflict and stabilise the energy supply chain.