Geoffrey Dennis: High oil and strong dollar weigh on India

what happened

India still lacks a catalyst capable of supporting a sustained market recovery. According to cnbctv18.com, independent emerging-markets commentator Geoffrey Dennis said investor sentiment is being constrained by high crude prices and limited support from real interest rates. A stronger US dollar is also weighing on capital flows into emerging markets, with some funds moving toward developed markets and selected oil-exporting economies.

Dennis said emerging markets could still have room to rise over the next five quarters, particularly where interest-rate support is attractive. He identified Brazil, Mexico and parts of Central Europe as markets with potential upside. In his view, the recent declines in South Korean and Taiwanese equities are unlikely to extend much further.

He noted that Korea and Taiwan still represent more than 100% of this year’s gains in emerging markets in dollar terms. The gap between emerging and developed markets has narrowed to below 600 basis points, from about 1,100 basis points roughly six weeks ago.

Dennis also expects one more Federal Reserve rate increase before year-end, although probably not at the next meeting. He said a rising dollar puts particular pressure on markets with limited interest-rate support, naming India and China among the weaker areas.

why it matters

For markets, the assessment highlights the vulnerability of Indian assets to imported oil costs and a stronger dollar, while Brazil, Mexico and parts of Central Europe may retain relatively better support from interest-rate conditions.

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