Finance

Ukraine attack wounds markets: Indices crack nearly 5%, Brent crude tops $105 a barrel


Most experts believe that the fall in the markets is just a knee-jerk reaction to the global crisis and volatility will stay in the short term. However, the long-term outlook for Indian markets remains positive despite headwinds, and investors should use this opportunity to accumulate quality stocks.

By Ruchit Purohit & Yoosef KP

The equity market’s worst fears played out on Thursday as Russia invaded Ukraine and the benchmark indices opened with deep cuts. Investors lost Rs 13.45 lakh crore of wealth, the highest single-day loss in absolute terms since March 23, 2020. The market’s fear gauge (Vix) went past 32, which was last seen at the peak of the pandemic in June 2020.

Stocks tumbled in the domestic markets in line with global markets as the escalation of the Ukraine crisis forced investors to take risk off the table. Brent crude rallied over 8% to hit an intra-day high of $105.79 per barrel and gold surged to a 17-month high of $1,962.16 an ounce, as investors looked for safety.

The Sensex and the broader Nifty50 slumped nearly 5% to log their biggest single-day fall since May 2020. With Thursday’s decline, both the indices have corrected about 12% from their October highs.

As of Thursday’s close, the combined market capitalisation of all BSE-listed companies stood at `242.24 lakh crore. Sensex has lost 3,612 points during the last seven sessions. Bank Nifty plunged 5.8% on Thursday, taking the cumulative fall from October highs to 14.5%. While the rupee depreciated 1.4% against the greenback to close at 75.65, the yield on the 10-year benchmark bond ended 2 bps higher at 6.76%.

Thursday also saw Nifty50 breaching its 200-day simple moving average (SMA) of 16,894.24, signalling a likely downward trend going forward. The Nifty50 currently commands 18.6 times its 12-month forward earnings, almost equal to the five-year average of 18.61x.

While the Sensex settled lower by 2,702.15 points at 54,529.91, Nifty50 closed 815.30 points down at 16,247.95 points. The broader markets underperformed their larger peers with both the BSE mid-cap and small-cap shedding over 5.5%. IndusInd Bank was the top Sensex loser, falling 7.9%. M&M, Bajaj Finance and Axis Bank were other top losers, falling about 6% in the session.

Vijay Chandok, MD & CEO, ICICI Securities, said: “While the escalated war situation between Russia-Ukraine has led to sharp cut in key equities across the globe, we believe crude trajectory will be the key to watch out for going ahead. We believe that market stabilisation is likely in the short term.” Chandok added that he continues to see this correction as an opportunity for investors to add on the companies with sustainable growth visibility.

Foreign portfolio investors (FPIs) have withdrawn $7.5 billion worth of shares from India so far in 2022, compared with selling of $3.2-billion South Korean shares and $4.2 billion worth of Taiwan equities. Indonesia and Thailand saw inflows of $1.5 billion and $2.2 billion, respectively, during the same period.

Veteran investor Shankar Sharma said: “India is dependent on foreign inflows and the Ukraine crisis will sour the mood of global investors towards emerging markets. When the mood sours, everything goes. However, every dip is a buying opportunity, but it depends on what you buy.”

Most experts believe that the fall in the markets is just a knee-jerk reaction to the global crisis and volatility will stay in the short term. However, the long-term outlook for Indian markets remains positive despite headwinds, and investors should use this opportunity to accumulate quality stocks.

Sectorally, all sectors ended in the red on Thursday — with the Nifty PSU Bank and Nifty Realty being the top laggards, falling 8% and 7%, respectively. The overall market breadth also turned broadly negative as nearly 3,185 shares declined on the BSE, while only 215 advanced.


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