Mumbai / Riyadh: The devil is at work. Fears of rising oil prices and the impact it may have on consumer spending and growth spooked the BSE Sensex on Tuesday, which plummeted 642 points or 1.7 per cent; the Nifty 50 index slumped 186 points or 1.7 per cent to close at 10,818. With the fall, the 50-share National Stock Exchange benchmark index has turned negative for 2019.
Investors fear that ris-ing crude oil prices in the aftermath of the attack on Saudi Arabian oil facilities is likely to widen the trade deficit gap for India, which imports around 80 per cent of its crude requirement.
But there was some good news, too, later in the day, which ought to cheer up the investors. Oil futures dropped sharply on Tuesday, after registering one of the sharpest rallies on record a day earlier, following a report that output from Saudi Arabia will be quick to recover.
The Saudis, it is understood are close to restoring 70% of the 5.7 million barrels per day production lost after the attacks, Reuters reported citing a Saudi source.
The source also said output will be fully back online in the next two to three weeks. With that, the focus has turned to the Federal Reserve, which has begun its two-day monetary policy meeting that will culminate in its interest rate update on Wednesday.
Media reports said consumers in India are unlikely to be burdened with an excessive hike in retail price of auto fuels. Sources also said that with three states - Maharashtra, Jharkhand and Haryana -- going to the polls next month, the government does not want to risk a fuel price surge and face consumer outrage.
Frequent increases in retail price of petrol and diesel could have an adverse fall out for the ruling BJP during the elections.Sources said that state-owned oil marketing companies have been told by senior government functionaries to keep the daily price movement of petrol and diesel in check between now and the end of elections.
This could be done by absorbing a portion of the price rise if the increase is in tandem with global factors, especially disruption of supplies post drone attacks.
Petroleum minister Dharmendra Pradhan on Tuesday played down the impact of rising oil prices and pointed out that India had a diversified basket. He also indicated that India may increase oil imports from Russia, if the need arose.