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Informist, Tuesday, Nov. 19, 2024

By Anjana Therese Antony

MUMBAI – Ukraine's missile strike on Russian territory sparked concerns in the domestic equity market Tuesday, owing to fear that investors would lose more money if things worsened. The Indian stock market will be shut on Wednesday on account of the Maharashtra Assembly elections, the exit polls for which will be closely watched by investors.

"Ukraine's attack may trigger Russia to go for a nuclear war, which Putin had warned. For a market which had more than enough reasons to fall, this comes as an additional headache," a research analyst at a domestic broking firm said. What adds to the worry is Russian President Vladimir Putin signing a revised nuclear doctrine Tuesday, declaring that a conventional attack on Russia by any country supported by a nuclear power would be considered a joint attack on Russia, according to various news reports. The attack comes a day after US President Joe Biden, for the first time, approved the use of US-supplied longer-range missiles by Ukraine against Russia. 

This is an added worry for investors in India who have been feeling the heat of unfavourable factors such as repeated foreign outflows, worries of a likely slowdown in US interest rate cuts, a slowdown in earnings growth, earnings downgrades after September quarter results, expensive valuations, and rising US Treasury yields. Though the day started with a fresh air for the Indian equity market, which snapped the seven-day losing run due to short covering, analysts do not expect investors make major profits in the coming sessions. 

The Nifty 50 and the BSE Sensex closed 0.3% higher each at 23518.50 points and 77578.38 points, respectively. Near-term support for the Nifty 50 is pegged at 23480-23250 points and resistance at 24600-24670 points, according to a technical and derivatives analyst at a domestic broking firm. 

Nervousness in the market was also evident in the fear gauge, India VIX, which rose after news of Ukraine's attack, and closed 3.3% higher at 15.6625. The index closed above 15 for the second consecutive session.

Geopolitical tensions between Ukraine and Russia were closely watched by global investors. These issues lead to panic among investors as they could put pressure on crude oil prices, a surge in which could result in volatility in global markets, including India. As India is a net importer of crude oil, it will be at a disadvantage, and it could also pull down the share prices of oil companies, particularly those of refiners who use crude oil as a key raw material. 

Analysts echoed that it is unlikely for the market to sustain the gains and inch higher in the short term. Returns from the equity market are expected to be much lower this year compared to the last few years, experts said. Some of them expect a further 10% fall in the Nifty 50 index within some weeks. US Federal Reserve Chairperson Jerome Powell's recent comment that the apex bank was not in a hurry to cut interest rates have hit sentiment this week. 

The increasingly bearish approach of foreign investors towards the Indian market has also been weighing the market down for nearly two months. FIIs increased their short positions in index futures to 76% from 19% at the end of September. They also offloaded shares worth nearly $11 billion in October and $2.32 billion till Thursday in November. The outflow in October was the highest monthly flow India has ever seen.

Among specific stocks, Garden Reach Shipbuilders & Engineers may rise more on Thursday. The company said it will supply 13 hybrid ferries to the West Bengal government for INR 2.26 billion. Shares of the company closed 1.6% higher at INR 1,409.25 on the National Stock Exchange. Godfrey Phillips India may also be in focus as the company said it will pay interim dividend of INR 35 per share.

On the global front, US state employment and unemployment data for October will also be monitored by global investors on Tuesday and the UK's October CPI data on Wednesday.  End

Edited by Avishek Dutta

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