As the Russian-Ukrainian war hits Indian stock markets, could the dark clouds have a silver lining?


Following the news of the “Russian-Ukrainian war”, Indian markets suffered one of the worst falls in recent times. The NSE Nifty 50 index fell 4.78% or 815 points, and the BSE Sensex 30 index fell 4.72% or 2702 points. There were sell-offs across the board with the Nifty PSU Bank Index down 8.26%, Nifty Realty down 7.17%, Nifty Media down 6.95%, Nifty Small Cap 100 down down 6.25% and Nifty Mid Cap 50 down 6.16%. Even sectors benefiting from this crisis, such as energy, have not been spared. The Nifty Energy Index was down 5.12% and Nifty Metals was down 5.26%.

Consumer staples or consumer staples and pharmaceuticals, considered defensive, fell 3.33% and 3.67% respectively. Another sector that benefits from the depreciation of the currency, namely information technology, also fell by 4.59%. So it was clearly a panic reaction from investors watching the news.

Towards the end of CY2021 and the start of CY2022, several market gurus and experts were expecting mild returns or single digits from CY2022 markets. Their reading was that much of the earnings growth is already in the price. Thus, the markets were already priced to perfection and left little room for disappointment. Second, the US Fed’s rate hike in 2022 was another headwind the markets were grappling with, and in particular foreign funds have been in aggressive selling mode for the past 4-5 months. Third, rising oil prices were another concern investors were wary of. To add to these global concerns, the Ukrainian crisis appears to be the proverbial straw that broke the camel’s back, at least as far as foreign funds are concerned. The day’s preliminary figures show that foreign funds were huge net sellers and domestic funds were huge net buyers.

How does the Russian-Ukrainian crisis directly affect Indian markets?

What is needed at this time is to assess the impact of the Ukrainian crisis on India and its economy. Firstly, apart from the rise in oil prices, which could be temporary or transient, or as long as the crisis lasts, how does the Ukrainian crisis directly affect India is a question that needs to be asked. We have recently seen a panicked market reaction to the COVID-19 pandemic, and an equally sharp and smart recovery delivering exceptional returns. Second, the Indian economy is on a solid footing and is expected to grow by 9% even in 2022 according to IMF projections. Third, the Union finance budget showed that the Indian government remains committed to fiscal consolidation and capital expenditure growth. Infrastructure spending in India has remained high throughout the COVID pandemic.

So the economy is on solid footing, with solid corporate earnings, rising tax revenues, growth in job creation, but markets have fallen due to a global event taking place away from India. The result is that valuation concerns are factored in due to the price action triggered by the sale of foreign funds.

Unless there is fear of a full-fledged World War III (which may well involve nuclear weapons and therefore seems highly unlikely), the only other aspect for any long-term investor is to check the quality of investments. The world has seen many crises over the past century, including two world wars, a great flu epidemic, a great depression, an oil crisis, the Gulf War, and more.

Written by Ashish Wakankar, founder of EquiPoise Capital Management Pvt Ltd, which analyzes the impact of the “Russian-Ukrainian war” on the Indian markets. The opinions expressed are personal.


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