Markets’ dilemma: Trust the bark or wag of oil prices
SPLIT SIGNALS. Surge in physical oil prices alongside a steep fall in futures underscores a stark divergence, with the gap between the two widening to historic highs. By Akhil Nallamuthu bl. research bureau
The spot oil market is barking loudly. Last week, it rallied to an all-time high of $144.46/barrel — levels not seen even during the frenzied rally of 2007-08 or the spike during the Russia-Ukraine war. Ideally, that should scare stock market investors, as too high an oil price, even if only over medium-term durations, can eventually lead to demand destruction and slow economic growth.
However, at the same time, the tail in the form of the oil futures market is wagging strong, signaling an optimistic picture. Decoding this tale of contrasts holds the key to the direction of stock markets from hereon. Last week, market sentiment improved after the announcement of a ceasefire in the US-Israel and Iran conflict. Consequently, the benchmark Nifty 50 rallied 6 per cent — its biggest weekly gain since February 2021 — while the S&P 500 and Dow Jones in the US rose over 3 per cent each.
This market rally was a direct response to oil futures correcting sharply. Front-month Brent crude futures fell nearly 13 per cent last week to $95.20/barrel, down about 20 per cent from the March 9 peak of $119.50. This decline reflects hopes of easing supply disruptions, particularly around the Strait of Hormuz. For now, markets seem to be trusting "the wag," but they may be risking ignoring ground realities.
Optimism vs. Operational Reality
Dated Brent, the primary benchmark for physical crude, hit a lifetime high of $144.46/barrel on April 7 before moderating to around $125.88. The divergence between Dated Brent and Brent futures has widened significantly since March 20, with the spread hitting a record high of $35.87 on April 9. This signals a disconnect between future expectations and current conditions.
At the core of this divergence is a mismatch: futures prices reflect expectations and hope, while Dated Brent reflects immediate supply realities. Disruption around the Strait of Hormuz has created severe tightness in prompt supply, with buyers scrambling for immediately deliverable "prompt barrels". While ceasefire optimism has compressed the geopolitical risk premium in futures, the physical reality remains far more complex.
Supply Constraints
About 20 million barrels per day (bpd), nearly 20 per cent of global crude supply, passes through the Strait of Hormuz. Even with alternate routes like Saudi Arabia’s East-West pipeline, a shortfall of over 10 million bpd could persist. Additionally, Middle East producers shut in 7.5 million bpd in March due to storage constraints, with outages projected to rise to 9.1 million bpd in April.
As oil piles up at storage hubs unable to move out of the Persian Gulf, it reaches what is known as “tank top,” raising the risk of further production shut-ins and tightening prompt supply. Even if the Strait reopens fully, supply cannot normalize instantly due to infrastructure damage, spiked insurance costs, and logistical bottlenecks. Stabilization could be delayed by 2-4 weeks, and bringing idled facilities back on stream can take four weeks or longer.
Furthermore, war-risk insurance premiums have reportedly surged up to 1,000 per cent, and tanker freight rates have spiked. These factors suggest spot prices could remain higher for longer than futures markets currently expect. Futures do not fully reflect this stress partly because of timing: Dated Brent reflects cargoes deliverable within 10 to 30 days, while front-month futures represent June delivery. Both markets do agree on one signal: the structure remains in backwardation, indicating tight near-term supply.
Stock vs. Flow
This dynamic involves what is termed the “stock versus flow” problem. The “flow” issue involves residual supplies still arriving from shipments sent before disruptions. The “stock” issue emerges if disruptions persist, causing flows to decline and inventories to deplete.
The transition from flow to stock stress will be critical over the coming weeks. That is when investors may begin to fear the "bark" of spot prices more than they take comfort in the "wagging tail" of the futures market.
Centre hikes windfall gains tax on diesel, ATF for exports
Our Bureau New Delhi
With global crude prices still elevated, the Finance Ministry on Saturday hiked the windfall gain tax on export bound diesel and aviation turbine fuel (ATF) by 158 per cent and 42 per cent, respectively, with immediate effect. This marks the first revision since the levy was re-imposed on March 26.
According to a set of notifications, the windfall levy on diesel will be ₹55.5 a litre, up from ₹21.5. The levy on ATF will rise to ₹14.5 a litre from the previous ₹10.2. Government officials clarified that the revision is not intended to boost revenue but is "more about not allowing exporters to take undue advantage due to price differences".
Finance Minister Nirmala Sitharaman previously stated on March 26 that these levies were raised to ensure that fuel is prioritised for domestic use. These adjustments occur as crude prices have slipped to the $95-96 per barrel range after recently exceeding $120; however, refined product prices remain high.
Invisible engines: Decoding the data centre ecosystem – business, economics and opportunities
Kumar Shankar Roy bl. research bureau
Every digital activity leaves a physical trail. When you make a UPI payment, stream Netflix, back up WhatsApp, place a stock market trade or ask ChatGPT a question, that request travels to a data centre, where servers process it and send a response back in milliseconds. Once seen as the Internet’s invisible plumbing, data centres are now at the centre of a global infra boom driven by AI, cloud computing & surging digital traffic.
Digital Landlords and IT Load
The data centre industry uses an unusual convention: although operators are effectively digital landlords renting out space and computing capacity, facilities are sized and marketed by the electrical power available to IT equipment, expressed in MW or GW of “IT load”, rather than by floor area. Global live IT capacity is estimated at about 60 GW in 2025, with projections reaching 100 GW by 2030.
The AI Shift
The global rush is being transformed by AI. AI facilities need far more power and cooling than older ones, as large language models can require 10-100 times the computing power of traditional applications. By 2030, AI could account for half of all global computing activity.
India’s Growing Market
Despite generating an estimated 20 per cent of the world’s digital data, India's data centre market remains smaller than the US or China, but it is among the fastest-growing. Capacity is rising from 0.375 GW in 2020 to an estimated 1.5 GW by 2025 across roughly 130-150 active centres. Mumbai and Chennai hold the majority of co-location capacity due to proximity to sub-sea cable landing stations. National capacity is projected to reach 4.5-10 GW by 2030.
Anatomy of a Data Centre
A modern data centre is five things rolled into one:
- Secure Building: Housing servers and storage.
- Private Electricity System: With multiple layers of backup.
- Cooling System: Designed to remove massive heat.
- Network Hub: Connected to fibre-optic cables and the Internet.
- Computing Power: From CPUs, GPUs, and specialised chips.
Cost Breakdown: According to BofA Global Research, IT equipment accounts for 79 per cent of the cost, followed by E&C (11%), electrical equipment (5%), thermal/cooling equipment (4%), and backup generators (1-2%).
Different Models
- Captive/Enterprise: Owned and run by a company for its own workloads.
- Co-location (colo): Shared facilities where multiple customers rent space and power. In India, average colo capex is ₹46.5 crore per MW.
- Hyperscale: Giant campuses for providers like AWS, Microsoft, and Google.
- Edge: Smaller, decentralised facilities (often below 10 MW) placed closer to users to cut latency.
Business Economics
Revenue is generated through pricing based on rack units, full racks, or cages, with rates increasingly linked to allocated power.
- Lease Model: The operator rents space/power/cooling while the customer manages IT.
- Managed Services: The operator also provides cloud/IT infrastructure. In India, lease rentals are around ₹10-11 crore per MW per year, and colo occupancy has surged to 97 per cent in FY25.
The Power Resource
Power is the most vital resource. GPU-based racks (like NVIDIA H100) draw about 10-30 kW each, while AI training racks can require 80-120 kW, a sharp jump from traditional 12 kW racks. A single 100 kW AI rack in India can cost ₹6-7 lakh per month just in electricity.
Investment Landscape
India’s data centre market has attracted nearly $94 billion in investments since 2019.
- Airtel (Nxtra): $1-billion investment from Alpha Wave, Carlyle, and Anchorage Capital.
- TCS/TPG: Partnering for HyperVault to scale 1 GW of AI-ready capacity.
- Adani Group: Plans to invest $100 billion by 2035 in renewable-powered AI data centres.
- RIL: Outlined a $110-billion, seven-year AI infra plan.
The Value Chain
The ecosystem includes server makers (Dell, HP), networking (Cisco, Juniper), electrical (Schneider, ABB), and cooling (Voltas, Blue Star). In India, names like Hitachi Energy, Polycab, L&T, and real estate players like Brookfield and Blackstone are active.
Regulatory and Risks
Regulatory tailwinds include the Budget 2026 proposed 20-year tax holiday for eligible foreign cloud companies and the DPDP Act 2023. However, challenges remain: a new centre requires close to 30 approvals, and cash flows are typically back-ended. Currently, no pure-play data centres are listed in India, though Sify Infinit Spaces may be the first.
Reliance seeks govt nod to buy Iranian oil
Bloomberg
Reliance Industries Ltd. has sought the Centre’s approval to import Iranian crude via four vessels, according to a person familiar with the matter, as the US sanctions waiver nears its April 19 expiry. The operator of the world’s largest single-site refinery is looking to ensure any purchases remain compliant with US restrictions on Tehran and do not violate Indian laws.
Indian refiners previously stepped up purchases of Russian oil after the Trump administration granted waivers that expire this month. Import figures showed about 1.9 million barrels a day of Moscow’s crude arrived in India last month, up from 1.1 million in February.
Limited Imports
Despite recent movements, buying from Iran has seen limited traction due to concerns over suppliers, intermediaries, and payment mechanisms tied to sanctions. India has not imported crude from Iran since 2019. However, the Oil Ministry noted in a social media post earlier this month that India is buying oil and liquefied petroleum gas from Iran.
Supply constraints have deepened following disruptions in the Strait of Hormuz, which curtailed shipments to India—the world’s third-largest crude importer. This has forced refiners, including Reliance, to seek alternative sources. Reliance has a history of turning to sanctioned producers and has already secured a US general licence to import Venezuelan crude.
Reliance’s imports from Russia, which accounted for nearly a third of India’s 1.7 million barrels a day last year, have plunged after the EU imposed restrictions on fuels made from Russian crude.
The Shipping Ministry has reportedly granted special clearance to four tankers — the Comoros-flagged Kaviz, Curacao-flagged Lenore, and Iran-flagged Felicity and Hedy — to facilitate potential cargoes. All four vessels are currently sanctioned by the US.
Orbicular gets ‘tentative USFDA nod’ for generic Semaglutide
Our Bureau Hyderabad
Orbicular Pharmaceutical Technologies has received ‘tentative approval’ from the USFDA for a generic version of Ozempic (semaglutide injection), developed in partnership with Apotex.
The product will be marketed and commercialised in the US by Apotex Corp., which is the ANDA applicant.
“We are proud to have supported Apotex in this important programme. Their regulatory leadership, combined with Orbicular’s development and execution capabilities, has been central to securing the FDA Tentative Approval,’’ stated MS Mohan, Managing Director, Orbicular Pharmaceutical Technologies, in a release on Saturday.
Barry Fishman, Chief Corporate Development Officer, Apotex, noted, “Orbicular’s scientific depth and...". (Note: The source text ends here.)
Gaining strength
US MARKET OUTLOOK. Rise last week has reduced the danger of further fall. Gurumurthy K bl. research bureau
The Dow Jones Industrial Average, S&P 500 and the NASDAQ Composite index rose sharply for the second consecutive week. The Dow Jones and S&P 500 was up 3 per cent and 3.56 per cent respectively. The NASDAQ Composite index was up 4.68 per cent.
The rise last week has taken the benchmark indices well above their key resistances. This has reduced the danger of the fall that we have been expecting earlier. Will the momentum sustain and negate the danger of a fall completely? Here is our analysis:
DOW JONES (47,916.57)
Immediate resistance is around 48,300. The index has to breach this hurdle to extend the upmove. If it does, then 48,900 can be seen first and will also keep the doors open to revisit 50,000 levels.
On the other hand, if the Dow turns down from around 48,300, a fall back to 47,200-47,000 is a possibility this week. The level of 46,500 will be a crucial support to watch. The index will come under danger for a fall to [omitted text] 6,750-6,700 is the next key support zone.
A rise to 6,900-6,930 is possible in the near term. The price action thereafter will need a watch. A strong break above 6,930 can take the S&P 500 index further up to 7,000. On the other hand, a downward reversal from around 6,930 can drag it down to 6,800-6,750.
NASDAQ COMPOSITE (22,902.89)
The strong rise and close above 22,500 last week have eased the downside pressure. This has reduced the danger of the fall to 20,500 mentioned last week.
The region between 22,500 and 22,400 will now be a very good support which can limit any intermediate dips. As long as the index stays above 22,400, the bias will remain bullish. As such, the NASDAQ [omitted text] fall back to 22,000-21,500 again.
DOLLAR OUTLOOK
The dollar index (98.70) has come down sharply last week. The close below 99 leaves our bullish view under threat.
A crucial support for this week will be at 98.60. The dollar index has to sustain above this support and rise past 99 again. If that happens, the index can get a breather and go up again to 100-100.50. That in turn will keep alive our broader bullish view.
But if the index breaks below 98.60, it can come under more selling pressure. In that case, a fall to 97.50 is possible. So, the price action around 98.60 will need a very close watch.
TREASURY YIELD
The support at 4.25 per cent mentioned last week is holding very well. The US 10Yr Treasury Yield (4.32 per cent) touched a low of 4.23 per cent and then has risen back very well from there.
A strong follow-through rise above 4.35 per cent from here can boost the momentum. Such a rise can take the yield higher to 4.45-4.5 per cent. It will also keep our broader bullish view intact to see [omitted text].
CRUCIAL SUPPORT: The dollar index has to sustain above 98.60 and rise past 99 again in order avoid a fall to 97.50.
Up from dire straits
INDEX OUTLOOK. The US-Iran war ceasefire triggered a sharp rise in the Indian benchmark indices. Gurumurthy K bl. research bureau
Nifty 50, Sensex and the Nifty Bank index surged last week. The US-Iran war ceasefire announcement triggered the sharp rise in the Indian benchmark indices. Sensex and Nifty were up 5.8 per cent and 5.9 per cent respectively. Nifty Bank index on the other hand surged about 8.5 per cent.
Two key observations on the recent market movement strengthens the bullish case. Firstly, before the ceasefire announcement for three consecutive trading days, every dip was bought. After the ceasefire announcement, the benchmark indices opened with a huge gap-up and was able to sustain higher for the rest of the week. These two factors indicate that fresh buyers are beginning to come into the market. That keeps the bias positive and leaves the door open for the indices to rise more in the coming weeks.
FPIs SELL
The Foreign Portfolio Investors (FPIs) continued to sell the Indian equities for the sixth consecutive week. They pulled out about $3.05 billion from the equity segment last week. The net outflow for the month of April now stands at $5.14 billion.
NIFTY 50 (24,050.60)
Short-term view: The outlook is positive. But an intermediate dip is a possibility before a further rise is seen. Nifty has supports at 23,700 and 23,500 which can limit the downside in the short term. Resistance is around 24,500 which can be tested in the near term. A break above it can take the Nifty higher to 24,900-25,000 and even 25,500 in the coming weeks. A fall below 23,500 is needed to drag the index down to 23,000 or lower. But that looks less likely.
Medium-term view: The rise to 24,000 has happened much faster than expected. That keeps the door open for the Nifty to see 26,500 in the medium term. A decisive break above 26,500 will boost the bullish momentum. Such a break will then strengthen the case for a rally to 28,000 and 30,000 in the long term. In case the index turns down from around 26,500, then the broader range will remain intact. In that case, a fall back to 24,000 and 22,000 again cannot be ruled out.
NIFTY BANK (55,912.75)
Short-term view: Immediate resistance is around 56,500. Failure to breach this hurdle can drag the index down to 53,900 or 53,600 in the near term. But a fall beyond 53,600 is less likely for now. So, eventually, the Nifty Bank index can break above 56,500 and rise to 58,000 and 60,000 going forward. The index will come under pressure for a fall to 52,000 and lower only if it breaks below 53,600.
Medium-term view: The rise above 54,000 has given some relief. The region between 60,000 and 60,500 will be a crucial resistance. A strong weekly close above 60,500 can take the Nifty Bank index higher to 64,000-65,000 in the medium term. It will also keep the upside open to see 68,000-69,000 in the long term.
SENSEX (77,550.25)
Short-term view: Immediate resistance is around 77,700. A break above it can take the Sensex up to 78,800 in the near term. That will keep the bias positive for the index to see 80,000 and even 82,000 in the short term. Key support for the week will be at 76,000. A fall to 75,000 will come into the picture only if the Sensex breaks below 76,000. However, a fall beyond 75,000 is less likely as fresh buyers can come into the market and limit the downside.
Medium-term view: The bias broadly remains positive. The region around 83,000 will be a key resistance. A break above it can take the Sensex up to 86,000 in the medium term. A further break above 86,000 will see the upside extending to 90,000 as well. That in turn will also clear the way for the Sensex to rally towards 98,000 in the long term. Failure to breach 86,000 and a reversal thereafter can drag the index down to 84,000-83,000 and even lower again.
NIFTY MIDCAP 150 (21,300.30)
The strong rise and close above 21,000 strengthens the bullish case. Support will now be in the 20,800-20,750 region. Resistance is in the 21,600-21,650 region which can be tested in the near term. Failure to breach 21,650 on its first test can trigger a corrective dip to 21,200-21,100. But this will be short-lived and the index can rise back again. An eventual break above 21,650 can then take the Nifty Midcap 150 index up to 22,700-23,000 over the medium term. A sustained break above 23,000 will be bullish from a long-term perspective. That will then trigger a fresh rally to 26,000-26,500 initially, and then, to 28,000-28,500 eventually.
NIFTY SMALLCAP 250 (15,753.05)
The rise to 16,000 is happening in line with our expectation. That keeps intact our broader bullish view. Cluster of resistances are there in the 16,000-16,500 region. Failure to break 16,500 can trigger a short-lived corrective fall to 15,500 or even 15,000. However, the bias will continue to remain positive.
As such we can expect the Nifty Smallcap 250 index to breach 16,500 eventually. Such a break can take the index higher to 17,700-18,000 in the medium term. A decisive break above 18,000 will then boost the bullish momentum. Such a break will see the Nifty Smallcap 250 index rallying to 22,500-23,000 in the long term. This will be a very good time to enter the smallcap segment. Investors with a time frame of two years can buy now and also accumulate on dips. They may have to have a stop-loss below 14,000.
SHORT-TERM TARGETS:
- Nifty 50: 24,500, 25,000
- Sensex: 80,000, 82,000
- Nifty Bank: 58,000, 60,000
RBI proposes payment curbs
The RBI has proposed a one-hour delay for digital transfers above ₹10,000 involving individuals, sole proprietors and partnership firms. This lag period is intended to allow customers to cancel or reconfirm suspicious transactions.
The discussion paper also includes the following proposals:
- Mandatory approval from a “trusted person” for transfers exceeding ₹50,000 made by individuals aged 70 and above or persons with disabilities.
- A requirement for banks to cap annual credits at ₹25 lakh for accounts that are not supported by additional proof of income or business activity.
- Any amounts exceeding this ₹25-lakh limit could be held as “shadow credits” for a period of up to 30 days.
Tweaks in NPS health scheme
PFRDA has allowed a modified proof of concept for the NPS Swasthya Pension. The health insurance benefit will now be mandatory, with premiums deducted through partial withdrawal from the subscriber’s NPS Swasthya account.
Key details of the scheme include:
- Minimum initial contribution: Set at ₹25,000 for joining the scheme.
- Medical expense provision: A new provision permits full withdrawal, subject to specific rules, following large medical expenses.
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