The geopolitical tension between Russia and Ukraine took center stage in the week gone by as military operations by Russia spooked investor sentiments. The benchmark indices recovered swiftly on Friday, gaining over 2.5 per cent, even as Russia moved to the heart of Ukraine, but they ended the week down nearly 4 per cent compared to the previous week.
The key reason behind the massive stock market fall was the military action against Ukraine by Russia where a sharp rise in crude oil prices and F&O expiry provided more power to bears in the Indian market. The situation is still uncertain and India VIX is still above 25 levels, therefore, we can expect volatility to continue in the coming week as well.
Macroeconomic Data
It is also a busy week in terms of the release of macroeconomic data points like domestic GDP and Manufacturing & Production PMI data.
FIIs
Santosh Meena, Head of Research, Swastika Investmart Ltd., said: “Derivative data is little supportive as FIIs are buying in index future and stock future where FIIs’ long exposure in index future has jumped to 62% from 60%. Put call ratio is sitting at 1.02 mark which is neutral for the market.”
Nifty Technical Outlook
Technically, Nifty has surrendered its 200-DMA has changed the overall structure of the market. It took support at 16,200 levels and then witnessed a smart pullback however 16,900-17,000 area is a critical resistance zone because it is placed at 200-DMA. If Nifty manages to take out the 16,900-17,000 supply zone then we can expect a rally towards 17,200/17,400 levels. On the downside, 16,200 is an immediate and strong support level; below this, Nifty may again revisit the 15,900-15,700 support zone.
Bank Nifty
“Banknifty has also surrender 200-DMA while 35,000 is an immediate and psychological support level while 34,250-34,000 is the next critical support zone. On the upside, 200-DMA of 37,000 is an immediate resistance level,” Meena said.
Crude Oil
Crude oil prices are rising and trading higher than $100 per barrel. This will certainly add to the raw material costs and squeeze margins of India Inc. They will also likely dismantle all projections by the Reserve Bank of India.
Global Cues
Markets globally witnessed carnage this week owing to the war-like situation and geopolitical tensions between Russia and Ukraine. Prevailing geopolitical tension would continue to take the centre stage and will be the major force guiding the direction of the market and sentiment of the investors globally. If a war-like situation between Russia and Ukraine persists, markets may dive deeper into the red sea.
What should investors do?
“In such a volatile market, a prudent approach is to have a balanced portfolio with a mix of equity, debt, gold, and cash,” said Vinod Nair, head of research at Geojit Financial Services.
Some analysts say it is a perfect opportunity for investors to accumulate downtrodden shares as well. “For the coming week, the geopolitical developments may be expected to continue to direct investor sentiment and keep the markets volatile; long term investors should utilise this opportunity to add onto the positions in well-established businesses,” said Joseph Thomas, head of research, Emkay Wealth Management.
“The looming uncertainty over the geopolitical tension combined with the rising crude would keep the participants on the edge in the following sessions. We thus recommend staying light and keeping a selective approach until the situation stabilises,” said Ajit Mishra, vice president – research, Religare Broking.
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