Mumbai : Indian stock markets edged higher for the third consecutive session on Wednesday amid positive global cues, even as geopolitical uncertainties and their economic fallout continued to impact the near-term outlook for equities. Progress in Russia-Ukraine ceasefire talks propelled the Sensex and Nifty up 1.28% and 1% on fall in crude oil prices.
Indian markets were supported by gains in Asian indices. The Taiwan, Hang Seng, Shanghai Composite and Jakarta Composite indices ended with gains of 0.59% – 1.96%.
Vinod Nair, Head of Research, Geojit Financial Services, said, “While there was high volatility in the global market, the peace talks between Russia and Ukraine raised hopes of a shortfall in the war, which helped trade with confidence in the domestic market.” Reducing crude oil and commodity prices supported the market, he said.
Positive global growth and some moderation in crude oil prices have helped the recovery, amid hopes that Turkey’s ongoing peace talks could bring an end to the war. However, VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said it is still early days.
Several experts said there are still uncertainties associated with the ongoing peace talks and that until the conflict is completely resolved, instability could ensue. European markets were trading weak on Wednesday and experts blamed doubts for it.
For countries like India, high crude oil prices will pose challenges and are likely to put pressure on margins and earnings of companies.
Experts also believe that crude oil may have come down from its peak in view of supply side challenges, but it may remain close to the level of $100 for some tom. Even if the war ends, sanctions cannot be lifted immediately. Commodity prices are expected to remain higher as supply side constraints continue.
External Factors Still India’s Investment Matters, HSBC Securities and Capital Markets (India) Pvt. Ltd said in its March 30 report. HSBC said that if crude remains above $100, it will be a major macro challenge for India. Second, an increase in US bond yields and an end to easy liquidity are also negative, although these are not new unknowns according to HSBC. The geopolitical situation also presents its own uncertainty, but if progress towards peace is visible, it could also present an upside risk.
Brent crude was hovering around $112 a barrel on Wednesday, lower than its March 25 closing level of $119.75. However, it is still much higher than the level of $101.23 per barrel that it closed on March 16.
Higher crude oil prices also put pressure on the rupee. Anindya Banerjee, vice-president of currency derivatives and interest rate derivatives at Kotak Securities Ltd, said, dollar demand from oil marketing companies pushed the pair towards 75.91. Banerjee expects the rupee to trade between 75.60 and 76.20 on the spot.
Foreign portfolio investors continue to be net sellers whose equity value has sold out 112,469 crore in 2022 till March 29. Domestic investors have given good support to the markets by buying in equity price 101,328 crores.
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