Russian-Ukrainian turmoil drives stock markets

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Buoyed by the BJP’s convincing victory in four out of five state elections, the modest decline in international crude prices and hopes for de-escalation between Russia and Ukraine; Domestic stock markets paused after four straight weeks of selling to close more than two percent higher in the week ended. Big swings are now commonplace for major stock indices, but even by today’s standards, the jumps and falls of the past fortnight have been extreme.

BSE Sensex added 1,216.49 points (2.23%) to end at 55,550.3, while NSE Nifty rose 385.15 points (2.37%) to end at 16,630.5. Rolling with the benchmarks, the BSE Mid-cap index rose 3% and the BSE Small-cap index jumped 3.2%. All sector indices ended in the green. The FIIs sold shares worth Rs24,688.44 crore and the DIIs bought shares worth Rs17,729.12 crore. In March to date, FIIs have sold shares worth Rs43,303.05 crore and DIIs have bought shares worth Rs30,329.05 crore.

The rupee ended down 43 paise at 76.59 to the dollar on March 11 against its March 4 close at 76.16. Next week might bring more jerkiness. The market is poised to rebound if the Ukraine crisis subsides, but markets could also be more volatile and fall further if it worsens. International crude oil prices are near their highest level in years, despite falling in recent days. The US Federal Reserve meets next Tuesday and Wednesday to vote on whether to raise the base interest rate and by how much.

Markets see a 96% chance of a 0.25 percentage point rate hike at the meeting. A month ago, they were showing about a 50% chance of a rate hike of 0.50 percentage points. Over the coming week, the war between Russia and Ukraine will continue to drive the markets. The Federal Reserve’s rate hike and economic projections, as well as rising crude prices will be the main factors to watch. Domestically, traders will be watching India’s inflation numbers and FII outflows. Markets offer opportunities on both sides. However, overnight risk and excessive volatility during the day are not easy to manage. The conservative approach is to focus more on the risk management aspects. The market will be closed for Holi on March 18.

F&O / sector watch

In the wake of the rapid recovery in cash markets, the derivatives segment saw robust volumes with strong swings in individual stocks. In the options segment, peak open call (OI) interest was seen at 17,500 strikes, followed by 18,000 and 17,000 strikes. Call writing was observed at 17,500 strikes, followed by 17,000 and 17,600 strikes. Maximum open interest for puts was seen at 16,000 strikes, followed by 15,500 and 16,500 strikes. Written put was seen at 16,000 hits, followed by 16,500 hits and 15,400 hits. Nifty could face an immediate hurdle in the 16850-16900 zone while

The 16400-16300 area could serve as a key support area for the index. Implied volatility (IV) for calls closed at 24.45%, while that for puts closed at 26.07. The Nifty VIX for the week closed at 25.58%, which was higher than the previous week. The OI’s PCR for the week closed at 1:44 a.m. The global data indicates that the Nifty could stay in a wide range of 16,000-17,000 levels for the upcoming sessions. Traders can expect sector-specific moves in the week ahead with the trend expected to remain in favor of the bulls. After the emphatic victory in the assembly elections, the NDA-led government could embark on implementing its reform agenda with more vigor.

Divestment and privatization of some UAPs are on the cards. Stay invested in PSU meters for steady returns over the next few quarters. Surprising gains likely in counters like SCI, BEML, BPCL and HPCL. Sales of passenger vehicles, two-wheelers and three-wheelers remained weak last month as chip shortages disrupted production in local industry and manufacturing hubs.

With chip shortages expected to improve and normalize towards the end of the year, industry sources are raising new concerns that if the Russian invasion of Ukraine continues for some time , it is likely that there will be an additional impact on the supply chain, which in turn can negatively affect vehicle sales. Expect limited range moves in the automotive sector with a continued focus on the electric vehicle segment. Equity futures that look good are BPCL, BEL, HPCL, Jubilant Food, Laurus Labs, Reliance Inds, Sun Pharma and Trent. Equity futures that look weak are ABB, Exide Inds, FSL, Havells, Muthoot Finance and UPL.

(The author is a stock market expert. He is the former vice chairman of the AP planning board)

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