Weekly market wrap: Ukraine war, rising oil prices drag Sensex, Nifty down for 4th straight week

Domestic equity market declined for the fourth straight week as the ongoing concerns on the Russia-Ukraine conflict coupled with soaring crude oil prices continued to weigh market sentiment. The benchmark BSE Sensex plunged 2.72 per cent to 54,333.81 for the week ended March 4. Likewise, the NSE Nifty index lost 2.48 per cent to 16,245.35 during the same period.

As many as 31 stocks in the Nifty index settled in the red. With a fall of 13.27 per cent, Maruti Suzuki India emerged as the top loser in the index. Shares of the company ended the week at Rs 7,247.30 against Rs 8,356.10 on Friday 25, 2022. Asian Paints and Eicher Motors also retreated over 10 per cent during the same period.

Other major players in the Nifty index such as Hero MotoCorp, Mahindra & Mahindra, Tata Motors, Dr Reddy’s Laboratories, UltraTech Cement, HDFC, Bajaj Auto, HUL, Bajaj Finance, Shree Cement, Grasim Industries, ICICI Bank, Axis Bank, Kotak Mahindra Bank, Tata Consumer Products and Bharti Airtel also lost over 5 per cent. On the other hand, Reliance Industries, BPCL, ONGC, Wipro, Tech Mahindra, UPL, Hindalco, Coal India and Tata Steel gained between 1 per cent and 12 per cent.

Vinod Nair, head of research, Geojit Financial Services said, “The Russia-Ukraine conflict, fresh sanctions on Russia by global powers, and reports of the Russian attack on Europe’s biggest nuclear plant in Ukraine added more tension on global investors. Rising oil prices along with uncertainties of supply change disruption have instilled fears of inflation crossing RBI’s tolerance level.”

“The sell-off was more in large-caps, dragged by FIIs selling compared to the broad market. Metal stocks rallied due to an increase in steel prices led by supply constraints in Russia and Ukraine and benefitting Indian steelmakers in the export market,” Nair added.

Brent crude oil price soared past $118 a barrel on Thursday, the highest level in nine years, as escalated Russia-Ukraine conflict and tightened sanctions on Moscow by western countries, led by the United States, created supply and trade disruptions.

Sectorwise, the BSE Auto, Bankex, Telecom and Realty index declined 8.83 per cent, 5.59 per cent, 4.19 per cent and 4.15 per cent for the week ended March 4. On the other hand, the BSE Metal index defied gravity and rallied 8.01 per cent. The BSE Oil & Gas, Power, IT and Teck also gained between 0.50 per cent and 5 per cent.

Commenting on the ongoing fall, Yesha Shah, head of equity research, Samco Securities said, “We feel that this is a ‘pause’ before the rise resumes and not the commencement of a bear market. This is since, historically, whenever a bull run has been preceded by a significant fall, our benchmark indices have more than doubled from the pre-fall peaks.”

Shah further added that the Indian economy has a good runway given the underlying stellar corporate earnings momentum, cleansed balance sheets, the banks’ improving asset quality, the levers in place for capex cycle revival and credit off-take, and the likelihood of a manufacturing resurgence given PLI and other government reforms.

In the forthcoming week, in addition to geopolitical tensions, the domestic market will look at state election exit poll data and the global market on BoE and Fed policy statements. "Based on current consensus, state elections outcome is unlikely to be a crucial factor but rather than a short-term positive and negative reaction, accordingly. Due to war uncertainties, central banks may balance their hawkish policy against expected earlier due to high inflation. It can provide leeway to the market in the short term. The market also awaits the release of February inflation data which is expected to remain high at 6.1 per cent compared to 6.01 per cent during January," Nair added.

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