Morgan Stanley Report on Sensex Performance after an Oil Shock

Morgan Stanley published a report in March 2011 on the performance of the Sensex six month after suffering an oil shock. As per the Morgan Stanley report Sensex gave over 24 per cent returns on an average within six months of an oil shock with an exception of the 1990 oil event. Out of the six oil supply shocks over the past three decades, only the Iraq war of 1990 had left Indian equities in the red six months after the shock. Besides this one oil crisis, in all the other five oil crises’ the Sensex has risen 24 per cent on an average in the six months after an oil shock. It was also pointed that Indian equities do not always correlate negatively with oil. The report also pointed out that oil price change in the past had very little explanatory power on forward Indian equity returns.