Russia-Ukraine war: Impact on markets and risks ahead

Russia Ukraine Crisis: Domestic stock markets plunged by over three per cent today and joined a global stock sell-off amid the escalating situation between Russia and Ukraine. What should investors do? What are the risks ahead?

The Sensex opened for trading with a loss of 1,800 points. (Express Photo: Ganesh Shirsekar, File)

Domestic stock markets on Thursday morning plunged by over three per cent and joined a global stock sell-off as the escalating situation between Russia and Ukraine and rising crude oil price hit the sentiment. After crashing by over 2,000 points at one stage, the benchmark Sensex was trading 1,668 points down at 55,563.92 and the NSE Nifty index 488 points lower at 16,574.80 in intra-day trade at 10.20 am. Investors cut their positions worried over the possibility of a prolonged crisis in Ukraine and its impact on the Indian economy.

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What’s going on in global markets?

With the Ukraine crisis flaring up, Brent oil crossed the $ 100 mark and Asia-Pacific shares fell amid concerns over disruption in supplies and sanctions. Gold, a safe haven asset in times of uncertainty, rose one per cent and last traded at $1,932 even as Russian President Vladimir Putin said in a public address that he had authorised a military operation in Ukraine, and NBC News reported explosions were heard in Kyiv. Stock markets in Japan, Hong Kong, S Korea and Australia were down by up to three per cent. Dow Jones fell 1.38 per cent and Nasdaq lost 2.6 per cent on Wednesday. “The geopolitical pot is boiling. If that is not enough, the Fed’s aggressive tone on rate hike is keeping market participants on the edge,” said an analyst.

How are Indian markets doing?

The Sensex opened for trading with a loss of 1,800 points. All sectoral indices are in the red with IT, telecom, realty, auto and metal stocks trading with a loss of up to four per cent. Tata Motors was trading with a loss of 6 per cent, RIL 3.5 per cent, TCS 2.86 per cent and HDFC Bank 2.85 per cent. Small-cap index shed 4.27 per cent due to heavy losses in the category. “The growing concern surrounding the deteriorating Ukraine crisis has pushed the stock markets into correction mode. The near 20 per cent decline from the peak in NASDAQ is a clear indication of the correction that has set in. Also, the safe haven gold shooting to $1913 is a reflection of the risks arising from the crisis,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

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What should investors do?

Analysts said investors should stay invested if they have a long-term investment plan and mutual fund investors should continue their SIP plan without breaking the investment. On the other hand, the big correction will give an opportunity to investors to pick up good quality stocks at attractive levels. “Investors should wait and watch the unfolding situation before taking up any major commitments. Buying should be confined to stocks segments which are fairly valued or have good earnings visibility,” Vijayakumar said.

What are the risks ahead?

If the Ukraine crisis escalates further, the market is likely to take further beating as oil prices are expected to remain at an elevated level. While the US Federal Reserve is also meeting next month to take a decision on hiking interest rates and tightening liquidity, there are expectations that the Fed may not go in for a steep hike or tightening. Another worry is the impact of rising crude oil prices on the Indian economy at a time when inflation is at the six per cent level, above the RBI’s upper band.

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