Stocks on the rise amid Russia-Ukraine crisis

Russia has gathered more than 100,000 troops near Ukraine, which is not part of the North Atlantic military alliance, and Washington, while keeping diplomatic channels open, has so far failed to defuse the crisis, that an invasion is imminent, Reuters reported.

Moscow has denied any such plans and accused the West of hysteria.

The BSE benchmark Sensex index ended 1,747.08 points or 3% lower at 56,405.84, while the National Stock Exchange’s Nifty fell 3.06% to 16,842.80.

This is the worst one-day fall in the benchmark indices since April last year and wiped out investors’ wealth. 8.47 trillion.

Rising geopolitical tensions between Ukraine and Russia, continuing inflation concerns on the back of rising crude oil prices and a sharp rate hike by the US Fed have created strong adversity for equity markets globally.

Foreign institutional investors continued to be big sellers of Indian stocks, adding to the pressure on the markets. In February so far, FIIs have sold net Indian equities 7,692 crore, while domestic institutions have bought net shares 5,837.25 crore. The Ukraine crisis pushed the price of Brent crude to a peak of $96.16, the highest since October 2014. Consequently, India VIX, which measures investor sentiment about market volatility, rose 23% on Monday.

“Geopolitical tensions and rising crude oil prices are weighing on investor sentiments, leading to a sharp increase in volatility. Last week, US bond yields fell 2% in response to strong payroll data and multi-decade high inflation, indicating the possibility of further growth forecast by the US Fed. All macroeconomic developments are leading to volatility in major asset classes including equities, debt and currency. Naveen Kulkarni, Chief Investment Officer, Axis Securities said, “We expect this increased volatility to impact small/midcaps more than largecaps.

Other markets were also burdened by the deteriorating geopolitical situation.

Japan’s Nikkei declined 2.33%, Taiwan 1.71% and Hong Kong 1.41%

“European stocks slipped to their lowest level in 20 days on Monday, with travel, banking and auto stocks falling as investors warned over geopolitical risks,” said Deepak Jasani, head of retail research. Time can attack Ukraine.” , HDFC Securities.

Investors are concerned that geopolitical tensions could push crude prices further up and fuel inflation in major economies.

“If the ongoing conflict between Russia and Ukraine or any retaliatory sanctions by the US causes oil prices to rise further. If crude goes further, India will be adversely affected, as India will see higher pressure on its balance of payments, as well as imports with higher inflation. Markets are also concerned that with rising inflation (on firming crude oil), the Fed may act faster than expected on tapering as well as rate hikes,” said Aishwarya Dadhich, fund manager, Ambit Asset Management. he said.

Crude oil demand is projected to rise to an all-time high in 2022, and thus, experts cautioned that any supply-side disruption caused by the Ukraine issue could lead to a further rise in oil prices.

“On the weekly chart, this is the eighth week in a row where the price has turned higher. The International Energy Agency raised its 2022 demand forecast and expects global demand to rise to 3.2 million barrels per day (bpd) this year, up 100.6 million barrels per day (bpd). Moreover, rising fears of an invasion of Ukraine by Russia, a top energy producer, have hit a seven-year high, said Gaurav Garg, Head of Research, Capitalvia Global Research Ltd.

On the domestic front, weak factory output numbers released on Friday also contributed to weak investor sentiment. India registered a growth of 0.4% in December, a 10-month low.

“Apart from the unfavorable base, the reduction in domestic demand is the main reason for the sharp slowdown in industrial production. There are reasons to suggest that rural demand is particularly weak. The contraction in staple production confirms this. While growth in primary and intermediate goods and infrastructure suggests a modest revival in investment demand, the performance of capital goods remains poor,” brokerage Anand Rathi said in a note on Monday.

The government on Monday reported that wholesale inflation declined marginally to 12.96% in January from 13.56% in December.