Domestic as well as global equity markets witnessed heavy volatility in February as worsening geopolitical tensions between Russia and Ukraine kept the investors cautious. Furthermore, factors like inflation, aggressive rate hikes expectation, rising bond yields, and surging crude prices also weakened market sentiments.
The benchmark Sensex and Nifty fell 3 percent each in February, however, the benchmark indices have tanked over 15 percent from their respective 52-week high hit in October 2021.
The Sensex hit its 52-week high of 62,245 on October 19, 2021. Currently, the index is trading around 53,000, down over 9,500 points from its high. Similarly, Nifty hit its 52-week high of 18,604.45 and is now down nearly 3000 points from that point.
On the Nifty50 index, 30 stocks have fallen over 20 percent from their respective 52-week highs. Hero Moto has fallen the most from its 52-week high, 36 percent followed by HDFC Life, which is down 33 percent from its 52-week high. Dr Reddy's, BPCL, IndusInd Bank, HUL and Shree Cements have also lost over 30 percent from their respective 52-week highs.
Meanwhile, UltraTech Cement, HDFC, M&M, Bajaj Auto, Tata Motors, Asian Paints, Divi's Labs and Tata Consumer are down over 25 percent each from their respective 52-week highs.
| Stock | CMP (Rs) | 52-Week high (Rs) | 52-week high date | % down from 52-wk high |
|---|---|---|---|---|
| Hero Moto | 2,213 | 3,491.50 | March 9, 2021 | -36.6% |
| HDFC Life | 516.50 | 775.65 | September 2, 2021 | -33.4% |
| Dr Reddy's | 3,761 | 5,614.60 | July 7, 2021 | -33% |
| BPCL | 340.60 | 503 | September 14, 2021 | -32.3% |
| IndusInd Bank | 853.10 | 1,242 | October 28, 2021 | -31.3% |
| HUL | 1,965 | 2,859.3 | September 21, 2021 | -31.3% |
| Shree Cement | 22,096 | 32,048 | April 8, 2021 | -31% |
| UltraTech Cement | 5,831 | 8,269 | November 8, 2021 | -29.5% |
| HDFC | 2,145 | 3,021 | November 15, 2021 | -29% |
The sharp fall in the markets is also on the back of consistent outflows by foreign investors. FPIs have turned net sellers for 5 consecutive months in Feb and have sold Indian equities worth $14.6 billion in the last 5 months. Just in Feb, this figure stood at $5 billion.
Going ahead, experts believe that both global and domestic markets will remain under pressure due to the current geopolitical tension and its effects like a surge in oil prices leading to a rise in inflation globally. They advise investors to focus on long-term investment in quality large-cap and mid-cap stocks with strong earnings growth and valuation comfort.
"Any early resolution to the geopolitical conflict would provide some stability to the market and also lower the inflation risk. However, the near-term outlook looks uncertain for the time being and that will likely keep equity markets volatile. Also, a further rise in global and domestic bond yields over the next few months could provide some headwinds to equities," said analysts from Kotak Securities.
Meanwhile, VK Vijayakumar of Geojit Financial Services noted that the extraordinary uncertainty triggered by the war has pushed commodity markets into turmoil. Crude at $128 is a big shock and this can impact global growth and aggravate inflationary pressures. In India, growth will be lower and inflation higher than projected for FY23, he added.
"The market is slipping into bearish territory. Investors have to be cautious. There is relative safety in energy due to high energy prices, metals due to high global prices and export segments due to resilient demand and rupee depreciation. Calibrated buying in very small quantities may be considered in the above-mentioned segments," cautioned Vijayakumar.
