Sensex rebounds 1,800 points in just 2 days. Relief rally or something else?
Premium- Stock market news: Analysts warned of further volatility as Russia showed no sign of letting up on its invasion of Ukraine
Indian stock markets were up 2% today in afternoon trade, extending the relief rally to the second day. The Nifty was up 2% at 16,340 levels while Sensex rose over 1,200 points, extending the previous session's 1% gains. European markets were sharply higher in early trade today while US stock futures also rose as investors monitored the Ukraine crisis and surging commodity prices. There was a little support to risk assets from comments by Ukraine's President Volodymyr Zelensky who said he was no longer pressing for NATO membership, said IFA Global.
"I have cooled down regarding this question a long time ago after we understood that ... NATO is not prepared to accept Ukraine," Zelensky said in an recent interview aired on ABC News.
But analysts warned of further volatility as Russia showed no sign of letting up on its invasion of Ukraine. The crisis has fuelled fears that the fragile global recovery from Covid-19 will be replaced by a period of stagflation, in which inflation surges and economies flatline or contract.
“As long as the war lingers and crude remains at high levels a sustained rally is unlikely. High crude oil will impact India's GDP growth and corporate earnings growth for FY 23. FY 23 Nifty EPS estimate of 870 at the beginning of this year will be missed. Higher inflation will be another negative," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
"IT, metals, energy and pharma stocks have done well since they stand to benefit from the price and demand trends. For investors who are prepared to take more hit in prices in the short run, quality financials present a buying opportunity," he added.
Some analysts said that Indian markets were extremely oversold after the recent Ukraine selloff and a relief rally was due.
As long as the cannons are heard, says Prashanth Tapse, Vice President (Research), Mehta Equities, volatility will be the hallmark. “Nifty’s biggest support is at Tuesday’s low at 15761 mark. Below Nifty 15671 zone, expect waterfall of selling which could take Nifty down to 14251 mark with inter-month perspective. From a chartist standpoint, the technical landscape will improve considerably only if Nifty closes above 16807 mark. We suspect, despite persistent FIIs selling, the bears are likely to take a breather because of a slight better market mood prevailing amidst extreme oversold conditions," he said.
Investors will also be keeping an eye on recent state election results which will be announced tomorrow. Analysts say this may have a short-term impact, depending on the outcome.
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“Currently, the focus of the market is on a geopolitical issue therefore the outcome of election results could have some impact on the market only for 1-2 days. The UP election is considered important from the market perspective as it is a major state to define the political situation and it could have caused a major swing in the market if there was no big global event. If BJP comes back in the power then Infra and Sugar stocks may do well due to stability in policies and vice-versa," said Parth Nyati, founder of Tradingo.
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