High commodity prices to impact auto, consumer staple sectors

Top Stories

»	49% Indian startups now from tier 2, 3 cities: Jitendra Singh
»	'India ranks 3rd in global startup ecosystem & number of unicorns'
»	Tripura exported over 9K tonnes of pineapples in 2 years
»	CPI inflation eases to 6.71% in July, IIP falls to 12.3%
»	Rupee depreciates 12 paise to close at 79.64 against US dollar

SME Times News Bureau | 25 May, 2021
Commodity prices have been an upswing of late amid the surge in Covid-19 cases, and this is likely to impact auto, consumer staples and durables sectors, according to a report by Motilal Oswal Financial Services.

The report noted that with the uncertainty in the demand environment, it would be difficult for companies to pass on the rise in commodity costs.

"The auto, consumer staples, and durables sectors would be highly impacted in such a scenario," it said.

In banking, it said that debt deleveraging by corporates has further impacted credit growth.

As per the Motilal Oswal report, the uptick in inflation could signal the end of the monetary easing cycle, which has aided the steady decline in funding cost for the system, thus driving healthy margins.

However, the adverse impact on auto, consumer, durables margins would be counterbalanced by an earnings uptick in the metals, cement, oil and gas sectors. The IT sector, which constitutes 15 per cent of the Nifty weight, is broadly insulated from commodity inflation.

"Earnings in the non-Nifty, non-commodity basket may be adversely impacted given the weak demand backdrop in the economy due to widespread lockdowns," it said.