Russia-Ukraine turmoil steering stock markets

Buoyed by the BJP's convincing win in four of the five State elections, modest fall in international crude prices and hopes of de-escalation between Russia and Ukraine; the domestic stock markets took a break from four consecutive weeks of selling to close more than two percent higher during the week ended. Big swings are now commonplace for major stock indexes, but even by current standards last fortnight's jumps and falls were extreme.

BSE Sensex added 1,216.49 points (2.23 percent) to end at 55,550.3, while NSE Nifty rose 385.15 points (2.37 percent) to end at 16,630.5 level. Riding along with the benchmark indices, the BSE Mid-cap Index rose three per cent and the BSE Small-cap index jumped 3.2 per cent. All the sectoral indices ended in the green. FIIs sold equities worth of Rs24,688.44 crore, and DIIs bought equities worth of Rs17,729.12 crore. In the month of March till date FIIs sold equities worth Rs43,303.05 crore and DIIs bought equities worth Rs30,329.05 crore.

The rupee ended 43 paise lower at 76.59 per dollar on March 11 against its March 4 closing of 76.16. Next week could bring more choppiness. The market is ready to bounce back if the Ukraine crisis de-escalates, 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 retreating 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 per cent probability of a rate increase of 0.25 percentage point at the meeting. A month ago, they showed a roughly 50 per cent probability of a rate increase of 0.50 percentage point. In the upcoming week, the Russia and Ukraine war will continue to steer the markets. The Federal Reserve's rate hike and economic projections, along with rising crude prices will be the key factors to watch. At the domestic level, traders will eye India's inflation numbers and FII outflows. Markets are offering opportunities on both sides. However, overnight risk and excessive volatility during the day are not easy to handle. The prudent approach is to focus more on risk management aspects. Market will be shut for Holi on March 18.

F&O / sector watch

Tracking the quick recovery in cash markets, the derivatives segment witnessed robust volumes with sharp moves in individual stocks. In the options segment, maximum Call Open Interest (OI) was seen at 17,500 strike, followed by 18,000 and 17,000 strikes. Call writing was seen at 17,500 strike, followed by 17,000 and 17,600 strikes. Maximum Put Open Interest was seen at 16,000 strike, followed by 15,500 and 16,500 strikes. Put writing was seen at 16,000 strike, followed by 16,500 strike and 15,400 strike. Nifty could face immediate hurdle at 16850-16900 zone while

16400-16300 zone could act as a key support zone for the index. Implied Volatility (IV) of Calls closed at 24.45 per cent, while that for Put options closed at 26.07. The Nifty VIX for the week closed at 25.58 per cent, which was higher than the previous week. PCR of OI for the week closed at 1.44. Overall data indicates that the Nifty could remain in a broad range of 16,000-17,000 levels for coming sessions. Traders can expect sector specific moves in upcoming week with trend likely to remain in favour of bulls. After the emphatic win in Assembly elections, the NDA-led government may embark on implementing its reform agenda with more vigour.

Divestment and privatisation of select PSUs is on cards. Stay invested in PSU counters for steady returns sin next few quarters. Surprising gains likely in counters like SCI, BEML, BPCL and HPCL. Sales of passenger vehicles, two-wheelers and three-wheelers continued to remain subdued last month, with chip shortage disrupting output across the local industry and manufacturing hubs.

While chip shortages are expected to improve and normalize towards the end of the year, industry sources are expressing fresh concerns that if the Russian invasion of Ukraine continues for some more time, there is likely to be an added impact on the supply chain, which in turn may adversely affect vehicle sales. Expect range bound moves in auto sector with continued focus on EV segment. Stock futures looking good are BPCL, BEL, HPCL, Jubilant Food, Laurus Labs, Reliance Inds, Sun Pharma and Trent. Stock futures looking weak are ABB, Exide Inds, FSL, Havells, Muthoot Finance and UPL.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)

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