Markets to be volatile this week

Indian markets witnessed steep fall this week following Russia’s attack on Ukraine after weeks of conflict. Nifty plunged more than 800 points on Thursday as sentiments soured over intense military assault by Russia. But, they bounced back on Friday recovering almost half of the previous day loss. Both Nifty/Sensex ended the week with losses of 618/1974 points (-3.6%/-3.4%) to close at 16,658/55,859, recording worst week in three months. Broader market too witnessed sharp selloff with Nifty Midcap 100/Smallcap 100, down 3.4% and 5.3% respectively.

All the sectors ended in red, with media down almost 8% while PSU banks slumped almost 6%. Auto and infra fell around 5% while FMCG, realty and energy were down 3-4%. India VIX spiked to 34 levels from 22 last week, which is the highest level since June 2020 level.

It, however, cooled down to 27 level on last day, giving some support to the market but overall higher VIX could continue to keep wider swings in the market. FIIs continue to be sellers, and sold equities to the tune of Rs 15,300 crore during the week (till Thursday), while DIIs bought equities to the tune of Rs 17,200 crore.

Also read: Equity m-cap lowest in 7 months in February; top 10 cos lose over Rs 3.3 lakh cr last week

Global markets too plunged sharply on Thursday on the fear of repercussions of Russia invasion of Ukraine. Oil surged above $100/barrel for the first time in seven years on the fear of disruption in supply. Gold prices also rose sharply as investors sought to safe haven amid volatility. They however witnessed a smart pull back the following day as the new sanction imposed by US & UK appeared to be less severe for the Russian economy.

Also, US and NATO refused to send their soldiers to Ukraine, thus preventing extreme war-like situation. Further, the geo-political turmoil has led to an expectation that US Fed may not aggressively increase interest rates in its March meeting, thus adding to positive sentiments today.

Sentiments took a hit with Nifty correcting by 13% from its high of 18,604. While markets have seen a pullback – volatility is expected to remain high over the next few days. Markets will be keeping a close watch on the ongoing Russia Ukraine conflict over the weekend for any further cues.

Apart from this, the US Fed meeting and election outcome of 5 states would further add to the volatility. For the near term, Thursday’s low of 16,200 may act as a strong support. While traders need to remain cautious of sharp volatility, Investors can use the current dip to gradually add quality blue chip companies in their portfolios.

(The writer is Head-Retail Research at MOFSL)