Indian benchmark indices witnessed massive selling on Monday due to an escalation of war by Russia which is not only impacting the gold and crude but overall commodities prices worldwide. Sensex ended at 52,843, down 1,491 points or 2.74 per cent. The Nifty 50 index touched an intra-day low of 15,711 before settling at 15,863, down 382 points or 2.35 per cent. Both indices are currently more than 15% down from their all-time highs. The recent correction has wiped out nearly Rs 29 lakh crore of investors’ wealth since the beginning of February. Analysts, traders asked investors to be cautious, and use the dip to accumulate quality stocks but avoid any fresh positions.
What’s dragging markets today?
“The benchmark indices are on massive selling due to an escalation of war by Russia which is not only impacting the gold and crude but overall commodities prices worldwide. New sanctions against Russia have triggered huge jumps in gold and crude prices. In this scenario when the economies were already struggling to keep the pace of recovery, the fears of stagflation also started to creep in, with concerns over high commodity prices impacting inflation and slowing growth. All these factors are impacting the markets worldwide and investment outflows,” said Ravi Singh-Vice President and Head of Research-ShareIndia.
Ravi Singhal, Vice Chairman, GCL securities Ltd said, “Today’s fall is due to news that the US can ban crude supply from Russia. Ukraine is retaliating harder than anyone expected and Putin has also said that it can go longer. So it can take another 20-30 days to settle the situation.” Anuj Gaur, Director of IBBM (Money maker India Securities) added, “Markets are very volatile and taking very wild moves nowadays due to war situations and upcoming election results. VIX is running very high which is an indication that the market is in a puzzling mood and can react aggressively to either side.”
What should investors do?
Take advantage of high VIX
“For traders it is good opportunity to take advantage of high VIX in the market, on the other side, for long term investors, All Defence sector stocks, Steel stocks, IT stocks and FMCG stocks will be a good bet for long term once war situation resume and become normal, these industries will react positively faster than other industries,” said Anuj Gaur, Director of IBBM (Money maker India Securities)
Avoid new investment
According to Ravi Singhal, Vice Chairman, GCL securities Ltd, this is not a time for new investment until this war situation is settled, but long term investors no need to worry about it. “As Warren Buffett once said that he will not sell equity in case of war, even if the conflict escalated into World war III,” he said.
Avoid taking fresh positions
“Nifty may touch the level of 15500 in near term with a strong prevalent bearish trend. Investors may remain cautious and follow a wait and watch strategy for the time being. Any fresh positions need to be avoided till the sentiments and situation stabilizes,” said Ravi Singh-Vice President and Head of Research-ShareIndia.
Opportunity to deploy capital by modestly accumulating good quality stocks
“At present levels, the markets are giving excellent opportunities for Investors to deploy their capital by modestly accumulating good quality stocks. Sectors that are beaten down the most like Autos, financials, etc. will bounce back equally fast. Some technical pullback remains imminent; if that happens, we will see pockets like Autos, select financials, PSE stocks, select IT and consumption pockets giving good returns over the medium term,” Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder, Gemstone Equity Research & Advisory Services, told Financial Express Online.
(The recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)
