Speaking to ET Now, Dalal said India’s vulnerability as a crude oil importer is becoming increasingly visible at a time when oil prices remain elevated.
India vs US: Why Markets Are Moving Differently“So, very simply put, you are right, Indian markets are going through a bit of a difficult period versus what you are seeing in the mother market which is the US. But the reason for that is the fact that we are oil importers and with crude at $104 a barrel, it hurts us. US on the other hand are crude exporters. Yes, it hurts their inflation because their gas prices are up, but for the economy as an overall when you exporting at that price, you are making, bringing more money into the country, that is great for the country as an overall thing. So that is the dichotomy that is happening between India and the US.”The comments come at a time when investors are increasingly worried about the impact of rising energy prices on India’s fiscal position, inflation outlook, and corporate profitability.
FMCG Margins May Have PeakedDalal acknowledged that recent earnings from several FMCG companies have surprised positively, particularly on the volume growth front. However, he believes the current margin cycle may be nearing its peak.“Now coming to the earnings, look, some of the FMCG companies have reported very-very good margins. You have actually even seen some of them reporting volume growths which are 9% and 10% which came in as a bit of a surprise on the positive side to be very frank because we were working more with like 4% and 5% volume growth, so that is a good thing.”But he cautioned that higher fuel costs are likely to ripple through the supply chain in the coming months.“Are margins topping out? I would likely say yes, because what is going to happen is you are going to see at some point in the very near future crude, petrol, and diesel prices being hiked. And especially when diesel prices get hiked, it affects the logistics space which pushes up costs of shipping goods from manufacturing location to the end consumer, which in effect somebody in the value chain has to take a hit.”
According to Dalal, investors may also be misreading the strength of recent quarterly numbers because many companies were still benefiting from lower-cost inventory during the March quarter.
“The bigger problem is which market is choosing not to address is we are looking at Q4 results which did not have bulk of the problems that happen. The pain point of a lot of the companies is going to actually be felt in Q1 because a lot of them were sitting on low-cost inventory.”
He added that weaker production trends and slowing economic activity could begin showing up more clearly in the next few quarters.
“I think Q1 you are going to see numbers quite subdued, companies not able to produce to their full capacity, economy showing signs of slowing down, so it is better to look forward than to look in the rearview mirror.”
Modi’s Appeal & The Debate Around ConsumptionDalal also weighed in on the market conversation surrounding Prime Minister Narendra Modi’s recent comments at a Hyderabad rally, particularly regarding discretionary spending and imports.
He dismissed concerns that comments discouraging certain purchases would materially alter consumer behaviour, especially in categories like jewellery.
“So, honestly, I really do not see…. I mean, people who want to buy gold jewellery are going to go buy gold jewellery. Just because Narendra Modi ji has said ki aap ek saal ke liye purchase mat kariye, does not mean that it is not going to happen.”
Dalal argued that broader economic priorities should take precedence over messaging aimed at reducing consumption.
“I understand the country needs it, but also what the country needs is for you to do more of development and less of freebies.”
He criticised what he described as “Robin Hood politics,” arguing that governments should focus more on investment-led growth rather than welfare-driven electoral strategies.
“One of the few things the government needs to first get its act together before they tell the people what to do is stop doing Robin Hood politics, which is basically give everything for free, charge the taxpayers and do all these various schemes to just get votes.”
OMCs Remain an AvoidOn oil marketing companies, Dalal remained cautious despite the possibility of rising fuel prices helping reduce under-recoveries.
“If you reduce your taxes, you could take a hit. Right now you are putting all the losses on the OMCs. So, when the prices rise, yes, of course, OMCs will stand to benefit. Their losses will come down, but are they going to make a profit? No, they are not. So, for me, those stocks are a definite avoid at this point of time.”
The remarks underline concerns that government intervention and pricing controls may continue limiting profitability for state-run fuel retailers.
Gold Demand Unlikely to FadeEven if import duties on gold rise further, Dalal does not expect Indian consumers to walk away from jewellery purchases altogether.
“When we have had various duties on gold, have people stopped buying gold jewellery? No, they have not. Maybe what will happen is people will buy smaller quantities because the prices are up.”
Importantly, he said he would not exit organised jewellery names despite policy uncertainty.
“Am I going to sell out on gold jewellery companies like Titan Company, a Kalyan Jewellers? No, I am not going to sell out on them. They will continue because the formalisation of the economy continues.”
FY27 Earnings Downgrades Could Become a RealityDalal’s biggest warning, however, was reserved for the broader earnings outlook if geopolitical tensions and elevated crude prices persist.
“The problem is if this war does not end soon… FY27 you are going to see earning downgrades continually happening over the year.”
He believes the market may currently be ignoring emerging stress points because domestic institutional inflows continue supporting valuations despite foreign investor selling.
“The stock market is probably ignoring a lot of the pain points that are going to come in the near future.”
With crude prices elevated, inflationary pressures building, and corporate cost structures likely to tighten further, Dalal’s comments serve as a reminder that the real test for Indian markets may still lie ahead rather than behind.
