Investing.com –

crude oil

Prices are currently hovering around $ 75, the highest this commodity has reached in the past 5 years. Investors may underestimate the threat posed by increased crude oil prices in Indian financial markets.

Refined

and

BSE Sensex

have recently hit all-time highs, so the risk of a downward move is even greater. But why are

crude oil

Prices so important to India?

Crude oil is the most valuable commodity that India imports and accounts for more than 25% of India’s total imports. India covers more than 80% of its oil needs through imports. Any sudden increase in import costs increases the trade deficit for India, which in turn affects the current account deficit (CAD). The widening of the CAD could add to inflationary pressures.

Growing inflationary pressures from a surge in oil prices could force the RBI to raise interest rates in their future sessions, which could be even more detrimental to India’s GDP growth. Another effect of the higher crude oil prices is the devaluation of the rupee (see

USD / INR

).

This clearly shows that the markets are underestimating the threat posed by high crude oil prices.

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Ref: https://in.investing.com