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Informist, Saturday, Apr. 25, 2026

 

MUMBAI – Uncertainty around US-Iran peace talks, higher crude oil prices and continued blockade of the Strait of Hormuz, despite the cessation of hostilities in the region, may force the government to raise retail prices of petrol and diesel, Emkay Global Financial Services said in a report Friday. "A 10% hike in retail petrol/diesel prices now looks likely, absent an agreement on the SoH (Strait of Hormuz)," it said. 

 

In the first round, the brokerage expects a hike of INR 10 per litre in petrol and diesel retail prices. "While this does not fully neutralise the under-recoveries of OMCs (oil marketing companies), the inflation shock from a larger hike poses too many macro risks to be seriously considered," it said. However, if crude oil prices do not normalise in the medium term, the brokerage expects further rounds of similar fuel price hikes. It sees retail prices rising by INR 18–INR 20 per litre over three–six months if crude oil prices do not cool off.

 

The fuel price hike is expected to impact inflation by around 75 basis points, including second-order impact, the brokerage said. Further, given that the expected fuel price hike only addresses 53% of current under-recoveries, it does not give the government the space to unwind the excise duty cuts announced in March, which will have a potential GDP impact of 0.2% on the fiscal deficit. For every INR 1 per litre reduction in under-recoveries, the combined annual loss of oil marketing companies would decrease by INR 130 billion to INR 140 billion, according to Emkay Global.  

 

While the brokerage remains optimistic about an agreement between the warring parties in the coming weeks, it has turned cautious on the domestic equity market as the valuation comfort has been taken out after its recent rally factoring in the US-Iran ceasefire but ignoring sustained higher energy prices. The Nifty 50 index now trades at a 2026-27 (Apr-Mar) price to earnings multiple of 19.5 times, and the discount to the long-term average is almost gone, the brokerage said. "We think the rally could take a break in the short term, with some downside if the SoH impasse is not broken in the next 7–10 days and the fuel price rise goes through," Emkay Global said. 

 

On the earnings front, while the brokerage expects a weak June quarter, it remains confident about earnings recovery in FY27 and FY28. Further, the brokerage expects foreign portfolio investors to pause heavy selling for the rest of 2026. While a potential US-Iran deal could clear earnings growth and currency outlook, a wave of foreign fund inflows is unlikely until valuations moderate, it said.  End

 

Reported by Arya S. Biju

Edited by Deepshikha Bhardwaj

 

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