The ongoing Russia-Ukraine war can benefit Indian investors if they know how to take advantage of the impact is having on the stock market. The Sensex index closed about 1,500 points lower at 52,842, while the Nifty 50 index dropped 382 points to close at 15,863 on March 7. The last time there was a big crash like this was when the Indian government announced a total economic shutdown barring a few essential services in March 2020.
“The market may remain volatile due to the Russia-Ukraine crisis. Trend in global equities, the movement of rupee against the dollar and crude oil prices will dictate the trend in the near term,” says Mitul Shah, head of research, institutional desk, Reliance Securities.
He adds that there is hope for revival. “The Indian economy is in good shape given the underlying stellar corporate earnings momentum, the cleansed balance sheets, improving asset quality of the banks, levers in place for capex cycle revival and credit off-take, probable manufacturing resurgence given PLI and other government reforms. This coupled with increasing DII (domestic institutional investors) participation can revive the markets to earlier high levels once prevailing clouds of uncertainty disappear,” says Shah. In the last six months, foreign portfolio investors (FPIs) have sold close to about Rs 1.22 lakh crore worth of equities but DIIs have been buying.
Situations like wars are unfortunate incidents but they still provide an opportunity for long-term investors. “Every time we wait for a correction and when it comes, there is a fear factor which grips investors. This is the time to slowly start getting into investment mode. If anyone is sitting with funds with at least three-five years horizon can start putting at least one-third of the corpus and the balance over the next three to six months,” says Juzer Gabajiwala, director, Ventura Securities Ltd.
Due to the intense selling pressure by FPIs, several good-quality large-cap and blue-chip stocks are available at a cheaper rate than earlier. The ongoing market-wide sell-off triggered by the Russia-Ukraine war only accelerated this phenomenon, since FPIs were selling long before the news of war broke out.
“FIIs have been pulling out money from Indian markets as concerns regarding valuation, higher inflation, and slow pace of economic growth impacted sentiments. In addition, geopolitical tension between Russia-Ukraine as well as rising crude oil added to the worries. On the contrary, DIIs have been providing support and continuously pumping in money in the markets. Going ahead, we believe the inflow from FII would depend upon softening crude oil prices, interest rates, improving economic growth and better earnings,” says Ajit Mishra, vice-president, research, Religare Broking Ltd.