Bears retained their dominance on Dalal Street on Monday morning. The intensifying war between Ukraine and Russia, and climbing oil prices to a decade high spooked investors. In morning trades, the BSE Sensex extended opening losses and fell up to 1,700 points, breaching the 53K-mark to around 52,640 levels, while the NSE Nifty50 was 450 points lower to 15,780.
Crude Prices Skyrocket
Prospects of the US and its allies imposing sanctions on Russian crude oil exports lifted Brent to $139 a barrel level, its highest since July 2008. Higher crude oil prices, if sustained for an elevated duration, can result in higher inflation, current account deficit, bond yields, and interest rates in India and thus impact macro-economic stability.
From India’s viewpoint, a sharp spike in crude oil prices (Brent crossed USD100/ barrel before retreating) poses key risks on the external balance front and can play spoilsport with the assumptions made in the FY23 Union Budget, Motilal Oswal Financial Services said in recent report.
Analysts said chances are higher that this fresh spike in oil prices would reflect on domestic fuel prices soon, after an unofficial freeze, following election results this week. They said the government may have to cut excise duty on diesel and gasoline to mitigate the impact on consumers.
Oil Shock Sends India’s Rupee to a Record Low
The rupee hit an all-time low of nearly 77 a dollar on Monday after crude oil made fresh surges on news reports that the US and its European allies were weighing a ban on Russian oil. This was the fourth consecutive session when the currency weakened.
“The rupee is expected to depreciate today due to risk aversion in global markets and an uptick in the dollar. Moreover, rising crude oil prices will continue to put pressure on the rupee. However, expectations of RBI intervention in forex markets may prevent further decline in the rupee. US$ INR (March) is likely to rise further towards 76.70 for the day,” ICICI Direct said in its report.
Investor Wealth Tumbles Over Rs 5.91 Lakh Crore
Investor wealth tumbled over Rs 5.91 lakh crore in morning trade on Monday tracking heavy decline in equities amid intensifying conflict between Russia and Ukraine.
After Early Glitch, NSE Says Indices Updating Now
The National Stock Exchange on Monday said trading in all segments on the exchange had normalized and broadcast had resumed in all indices after a technical glitch in early trade.
Earlier the exchange had said “Trading in all segments is functioning normally. However, Nifty and Bank Nifty indices are intermittently not getting broadcasted. The exchange is working on resolving the issue and shall keep the members informed.”
Rate Sensitive Indices Slump
Shares of interest-rate sensitive sectors were under severe pressure on Monday, with financials including banks, non-banking finance companies (NBFCs), housing finance companies (HFCs), automobiles, and real estate sector stocks down up to 6 per cent on the National Stock Exchange (NSE) in intra-day trade on concerns of reversal in interest cycle due to rising inflation.
Ashok Leyland, Maruti Suzuki India, Eicher Motors and Mahindra & Mahindra (M&M) from automobiles; Prestige Estates, Sobha and Macrotech Developers from real estate; Bajaj Finance, ICICI Bank, Mahindra & Mahindra Financial Services and Shriram Transport Finance from the financials were down between 5 per cent and 6 per cent.
Paint Stocks Tumble up to 11%
Rising crude prices sent paints stocks tumbling up to 11 per cent in Monday’s trading session, with Indigo Paints hitting a fresh 52-week low level. Santosh Meena, Head of Research, Swastika Investmart said paint stocks are tumbling as there is a double whammy situation for them where boiling crude oil prices is a key challenge because it will dent the margin as crude is one of the key raw materials for the paint companies.
Gold Prices
An escalation of the war by Russia is impacting commodities prices worldwide. New sanctions against Russia triggered massive jumps in gold prices as well. Fears of stagflation also started to creep in, with concerns over high commodity prices impacting inflation and slowing growth.
Gold hit the key level of $2,000 per ounce on March 7 in the international markets as concerns over the Russia-Ukraine conflict pushed investors towards safe-haven assets.
Nifty Technical Outlook
On the technical front, Immediate support and resistance in Nifty 50 are 15,700 and 16,500 respectively. Bank Nifty immediate support and resistance are 33,500 and 35,100 respectively, Mohit Nigam, head – PMS, Hem Securities.
What Should Investors Do?
VK Vijayakumar, chief investment strategist at Geojit Financial Services, said: “Market is slipping into bearish territory. Investors have to be cautious. There is relative safety in energy due to high energy prices, metals due to high global prices, and export segments due to resilient demand and rupee depreciation. Calibrated buying in very small quantities may be considered in the above-mentioned segments.”
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