Tumbling commodity, oil prices bad omen for India Inc earnings

A sharp decline in commodity and crude oil prices following the US' announcement of reciprocal tariffs may weigh on Indian stocks and corporate earnings.

- KRISHNA KANT

Historically, commodity and crude oil markets have exhibited a high positive correlation with equity valuations and company profits. Analysts caution that falling commodity prices often signal weaker economic growth and softer aggregate demand — both typically have a dampening effect on corporate performance.

While the correction in commodity and energy prices may improve margins and earnings for user industries—such as fast-moving consumer goods, paints, cement, pharmaceuticals, and automobiles—these benefits are likely to be offset by deteriorating earnings in commodity-producing sectors, including mining, metals, and oil & gas.

The CRB Commodity Index which tracks 19 commodities, including crude oil, natural gas, industrial metals, agricultural goods, and precious metals is down 1.4 per cent so far this April, while Brent crude and the London Metal Exchange (LME) index, tracking industrial base metals, are down 13.7 per cent and 9.1 per cent, respectively.

The Nifty 50, on the other hand, has corrected 4.2 per cent on a month-to-date basis.