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Crude plunges: Right time to develop strategic reserve for oil, says Invesco Mutual Fund

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Crude plunges: Right time to develop strategic reserve for oil, says Invesco Mutual Fund

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This kind of draw downs in oil prices do not last that long. So we will have to see where this can stabilize over the longer term, but they do offer some opportunities in the market, said Taher Badshah, CIO-equities at Invesco Mutual Fund.

Globally, oil prices fell on Monday after Saudi Arabia started a price war with Russia by slashing its selling prices and pledging to unleash its pent-up supply onto a market reeling from falling demand because of the coronavirus outbreak.
Markets right now might face a demand shock globally, said Taher Badshah, CIO-equities at Invesco Mutual Fund. “This is a time when we can develop strategic reserve on oil and from more macro standpoint it would be good for the country. Some of the crude sensitive stocks like oil and gas companies, oil marketing companies, utilities and users of fuel as well are going to be beneficial."
However, this kind of draw downs in oil prices do not last that long. So we will have to see where this can stabilize over the longer term, but they do offer some opportunities in the market,” he added.
According to him, “The band between USD 60 and USD 75 per barrel for crude is the most comfortable from an overall global standpoint, everybody is happy across the world if crude stays in that band.”
When asked about Yes Bank debacle, Badshah said, “We are faced with a slightly complicated situation. I wouldn’t call it a crisis, but we are in a situation where we need to handle things well from here. Yes Bank resolution was something which was expected. Now we have to only make sure that the contours are such that it doesn’t create systemic risks for us.
"Therefore, any kind of policy missteps in this regards can create tailspin for us. So, between the government and central bank we need to make sure that that doesn’t happen. The good part is that compared to IL&FS crisis that we saw about a year and a half ago, we are relatively better from liquidity standpoint in the market today. There is relatively higher risk aversion," said Badshah.
"Some of the liquidity flowing through the system and transmission effects have been created and put into place. So, if we can handle this systemic risk  better through better policy action, we should be able to wade through,” added Badshah.
Talking about pockets/sectors of interest, he said, “We are finding opportunities across. From a strategy perspective, our portfolio standpoint is balanced. We are willing to buy certain commodity names also under certain circumstances, where the balance sheets are relatively okay. We are also willing to buy some of the consumer discretionary and some of the consumer staple names, at least where we see a potential for better growth characteristics and valuations are not very stretched.”
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