Steel prices to see near-term boost; full pass through of energy costs unlikely: Credit Suisse

The Russia-Ukraine war has dented steel exports from the region. It has also resulted in an ensuing rise in coking coal and crude oil prices. Brent crude has surged overnight and is currently trading above $110 per barrel. To assess what could be the impact on the market of the rising commodity costs, CNBC-TV18 spoke to Neelkanth Mishra, Managing Director, Co-Head of Asia Pacific Strategy and India Equity Strategist, Credit Suisse.

Mishra believes a near-term boost in steel prices is possible. "We are telling investors that steel prices are going up because if coking coal goes up, iron ore goes up and there is supply destruction and Russia-Ukraine were net exporters of steel, there is going to be a near-term boost in steel price and stocks have reacted to that," said Mishra on the sidelines of the 25th Credit Suisse Asian Investment Conference.

On energy prices, he mentioned that it is unclear how long the volatility in prices will persist. However, he clarified that volatility in energy prices may not be a huge negative from an earnings perspective, even though a complete pass-through of energy costs seems unlikely.

On stock market, he mentioned that he expects it to flatline. He is of the view that earnings will support time correction in the market. Additionally, he remains overweight on banks.

"From an earning’s perspective, there is less of a risk. There will be some risk, some companies will have to take margin hit. Some companies will see consumption growth; volume growth started to suffer, which we have been seeing in the last 3-4 months and that could persist for longer but at an aggregate level, earnings risk is lower but the challenge is going to be on price, on earnings," said Mishra.

Meanwhile, Credit Suisse is celebrating the 25th year of its Asian Investment Conference from March 21. The four-day conference is focused at exploring the road ahead in Asia over the next quarter century.

For the entire interview, watch the accompanying video