Stocks, Rupee in free fall, oil rises

But the bad news for stocks was a boon for safe assets like gold and government bonds. Crude oil crossed the $100 mark amid expectations of a shortfall in supply.

India’s benchmark indices Sensex and Nifty lost 4.72% and 4.78% respectively, marking one of the sharpest daily declines in nearly two years. The decline put the indices in correction zone – defined as a decline of at least 10% from the most recent peak. On October 19, the Sensex touched a record high of 62,245.43.

A decline of about 6% was recorded on 4 May 2020 amid a nationwide lockdown by the government and escalation in US-China tensions.

The Russian invasion created the worst security crisis in Europe since World War II. The attack on Ukraine has increased the pressure on the global economy already from the pandemic and galloping inflation. Investors fear the unfolding crisis will further increase the companies’ raw material and energy costs. Sanctions against Russia by Western powers are likely to isolate the then superpower, a major producer of oil and commodities.

Global markets also saw a deep correction. In Asian markets, Hang Seng, Taiwan, Nikkei, Shanghai Composite and Jakarta Composite ended the day lower by 1.48-3.21%.

Amar Ambani, Head of Institutional Equities, Yes Securities, said, “When Covid has weakened the already sovereign balance sheet, the world can afford further disruption in trade and commodities.”

Brent crude reached $105 a barrel, a level not seen since August 2014, raising concerns.

S&P Global Platts Analytics said $100 oil adds to the pain as Asia’s top oil importers depend on imports for 70-100% of their needs. “Higher oil prices will dampen demand and undermine a fragile economic recovery,” said Lim Jit Yang, oil markets advisor at S&P Global Platts Analytics.

Concerns are likely to remain high. Hetal Gandhi, director of CRISIL Research, said, “In the medium term, crude oil prices may remain above $100 a barrel, unless OPEC decides to increase production.” Interestingly, OPEC members have failed to meet production targets over the past three months.

The developments come even as India’s recovery remains fragile. “Higher crude oil prices may delay the moderation in inflation, which was expected to ease by the second half of 2022,” said Naveen Kulkarni, chief investment officer, Axis Securities.

Kulkarni said the developments are creating volatility in major asset classes including equity and debt.

Deepak Jasani, Head, Deepak Jasani, said, “The impact of these actions in terms of impact on commodity prices including crude oil, supply disruptions and sanctions that may be imposed by Western countries remains uncertain and will result in a further downgrade in the next phase. might.” Retail Research, HDFC Securities.

Foreign portfolio investors remained net sellers. FII sold Equity worth Rs 58,408.73 crore as on February 23 this year, while domestic institutional investors bought 47,883.65 crore equity.

Meanwhile, gold prices rose as investors sought protection. MCX Gold rose 2.91 per cent. However, the rupee continued to weaken. At 75.65 per dollar, the rupee has depreciated 1.43% over the previous close. Experts said further depreciation cannot be ruled out.