Uncertainties over the ongoing Ukraine war along with concerns over Chinese restrictions to curb the fresh spread of Covid-19 punctured market sentiment as the key equity indices the Sensex and the Nifty ended a percent lower on March 21, breaking a two-day winning run.
Sensex closed 571 points, or 0.99 percent, lower at 57,292.49 while the Nifty finished at 17,117.60, down 169 points, or 0.98 percent. Investors lost ₹2 lakh crore in a single day as the overall market capitalisation of BSE-listed firms dropped to ₹258.4 lakh crore from ₹260.4 lakh crore in the previous trading session on March 17.
The Ukraine war, which started on February 24, is not showing any signs of an ebb even in its fourth week. As per a Reuters report, on March 21, "Ukraine defied a Russian demand that its forces lay down arms before dawn on Monday in Mariupol, where hundreds of thousands of civilians have been trapped in a city under siege and already laid to waste by Russian bombardment".
Several rounds of talks between Russia and Ukraine failed to end the war and the world now stares at uncertainty as to how things will pan out in the coming days.
The war has shot up crude oil prices again as the benchmark Brent Crude rose over 3 percent to trade near $112 a barrel. A rise in crude oil prices dented the Indian rupee as the domestic currency slumped 31 paise to close at 76.15 (provisional) against the US dollar.
"With no significant improvement in the tensions between Russia & Ukraine and uncertainty in the Gulf region, crude prices surged leading to a selloff in the domestic market after the recent rally. FIIs coming back to buying mode is a positive for domestic equities but a rise in bulk diesel prices and inflationary pressure is bending the domestic market," said Vinod Nair, Head of Research at Geojit Financial Services.
While the market benchmarks fell by a percent, the second rung mid and small cap indices outperformed. The BSE Midcap index closed 0.68 percent lower but the BSE Smallcap index rose 0.38 percent.
Among the sectors, utilities, power, FMCG, bank, finance and capital goods fell over a percent each. Even though the Sensex fell, as many as 175 stocks, including Sun Pharma, Titan, NIIT, Shoppers Stop and Vedanta, hit their fresh 52-week highs on BSE.
The current geopolitical issue may have a longer than expected impact on the global economy, experts warn. In India, in order to save the rupee from further slide against the US dollar, the RBI sold dollar from its reserve. Consequently, India’s foreign exchange reserves fell by $9.64 billion to $622.275 billion during the week ending March 11, 2022, marking its sharpest decline in nearly two years.
"Rising oil prices and Ukraine crisis kept investors on edge. Traders were also worried as India's foreign exchange (forex) reserves declined by $9.646 billion to $622.275 billion in the week ended March 11, the sharpest decline in nearly two years,” said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers.
"Markets are dancing to the global tunes and we don’t see this changing anytime soon. Broadly, we reiterate our positive bias till Nifty upholds the 16,800 level, however, the key is to identify the sectors and stocks which are showing resilience and add them on dips," said Ajit Mishra, VP - Research, Religare Broking.