Bears maintained their dominance on Dalal Street Monday morning. The intensification of the war between Ukraine and Russia and the rise in oil prices to a decade-high scared investors. In the morning trades, the BSE Sensex extended its opening losses and fell to 1,700 points, crossing the 53K mark to around 52,640 levels, while the NSE Nifty50 was 450 points lower to 15,780.
Raw prices skyrocket
The prospects of the US and its allies imposing sanctions on Russian crude exports lifted Brent to $139 a barrel, its highest level since July 2008. Higher crude oil prices, if sustained over time, could lead to higher inflation, current account deficits, bond yields and interest rates in India and thus affect macroeconomic stability.
From India’s point of view, a sharp spike in the price of crude oil (Brent passed USD 100/barrel before pulling out) poses significant risks on the external balance sheet front and could play a game-breaker with the assumptions made in the Union’s budget for the fiscal year 23, Motilal Oswal Financial Services said in a recent report. †
Analysts said this new spike in oil prices is more likely to soon be reflected in domestic fuel prices, after an unofficial freeze, following this week’s election results. They said the government may need to cut excise taxes on diesel and petrol to lessen the impact on consumers.
Oil shock sends Indian rupee to record low
The rupee hit an all-time low of nearly $77 per dollar on Monday after crude oil made fresh gains following news reports that the US and its European allies were considering a ban on Russian oil. This was the fourth consecutive session in which the currency weakened.
“The rupee is expected to depreciate today as a result of risk aversion in global markets and a rise in the dollar. In addition, rising crude oil prices will continue to put pressure on the rupee. However, expectations of RBI intervention in forex markets may prevent a further decline in the rupee. US$INR (March) is likely to rise further to 76.70 for the day,” ICICI Direct said in its report.
Investor Wealth Drops Over Rs 5.91 Lakh Crore
Investors’ net worth slumped in morning trading at Rs 5.91 lakh crore on Monday, followed by a heavy fall in shares amid mounting conflict between Russia and Ukraine.
After early outage, NSE says indexes are now updating
The National Stock Exchange said Monday that trading in all segments on the exchange had normalized and transmissions had resumed in all indices after a technical glitch in early trading.
Previously, the exchange had said: “Trading in all segments is normal. However, Nifty and Bank Nifty indices are not broadcast from time to time. The exchange is working on a solution to the problem and will keep members informed.”
Rate-sensitive indices fall
Shares of interest rate sensitive sectors came under heavy pressure on Monday, with financial institutions including banks, non-bank finance companies (NBFCs), home finance companies (HFCs), autos and real estate stocks falling as much as 6 percent on the exchange. National Stock Exchange (NSE) in intra-day trading amid concerns about interest rate cycle reversal due to rising inflation.
Ashok Leyland, Maruti Suzuki India, Eicher Motors and Mahindra & Mahindra (M&M) of cars; Prestige Estates, Sobha and Macrotech Real Estate Developers; Bajaj Finance, ICICI Bank, Mahindra & Mahindra Financial Services and Shriram Transport Finance of the financials fell 5 to 6 percent.
Paint stocks tumble to 11%
Rising crude oil prices caused paint stocks to plunge to 11 percent during Monday’s trading session, with Indigo Paints hitting a new 52-week low. Santosh Meena, Head of Research, Swastika Investmart, said paint stocks are tumbling as there is a double whammy for them where boiling the price of crude oil is a major challenge as it will hurt margins as crude oil is one of the most important raw materials for the paint. businesses.
An escalation of the war by Russia has consequences for raw material prices worldwide. New sanctions against Russia also caused huge jumps in the gold price. Fears of stagflation also began to creep in, with concerns about high commodity prices impacting inflation and the slowdown in growth.
Gold hit the key level of $2,000 an ounce in international markets on March 7, as concerns over the conflict between Russia and Ukraine pushed investors into safe-haven assets.
Helpful Technical Perspectives
On the technical side, the 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: “The market is sliding into bearish territory. Investors need to be cautious. There is relative safety in energy due to high energy prices, metals due to high world prices and export segments due to resilient demand and the depreciation of the rupee. In the above segments, calibrated buying in very small quantities can be considered.”
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