New Delhi, April 6 Elevated global crude oil prices above $90 per barrel could begin to significantly weigh on earnings of Nifty companies, a report has said.
According to Bernstein analysts' estimates, for every $10 per barrel increase beyond $90, Nifty earnings may decline by 2-3 per cent, with the impact worsening sharply at higher price levels. While crude has a limited direct linkage to the index, its broader macro impact, including inflation, currency depreciation and policy responses, becomes more pronounced at elevated levels, it noted.
Bernstein said within the $60-$90 per barrel range, the effect on earnings remains gradual, with long-term earnings growth potentially slowing from 10-11 per cent to around 7 per cent.
However, once crude moves beyond $90, the pressure intensifies as rising inflation begins to erode consumption and savings, particularly impacting consumer-oriented sectors.
Higher oil prices also weaken the rupee, increasing costs for import-dependent industries such as pharmaceuticals, cement and chemicals, while rising logistics expenses further compress margins across sectors.
"At higher crude levels, the earnings drag accelerates, with nearly 4 per cent downside for every $10 increase beyond $90. At $120-125 per barrel, the impact could be severe enough to significantly erode overall earnings," the report said.
Sector-wise, financials -- which contribute nearly half of Nifty earnings -- are relatively insulated and could even benefit from a higher interest rate environment. IT companies may see limited gains from a weaker rupee.
In contrast, consumer sectors and import-reliant industries are expected to bear the brunt of rising costs and demand slowdown. Within the energy space, upstream companies may benefit from higher crude prices, while oil marketing firms could face margin pressures.
Overall, the report said sustained spikes in crude oil prices pose a key downside risk to earnings, particularly if they remain above the $90 per barrel threshold.
Brent crude futures advanced as much as 2 per cent or $2.2 to $111.23 per barrel, hovering near a 52-week high, while the US West Texas Intermediate (WTI) crude jumped 3.53 per cent or about $4 to $115.48.
On Monday, domestic headline indices showed negative performance, with Sensex plunging more than 500 points or 0.72 per cent to 72,790, hitting an intraday low, and Nifty declining 150 points or 0.66 per cent to 22,561, logging an intraday low.
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