Indian markets have been on a downward trend since the first reports of an escalating crisis between Ukraine and Russia surfaced. On February 13, the United States accused Russia of deploying up to 150,000 troops near Ukraine's borders for an invasion. Since then, the Indian markets have lost around 3 percent.
Just today, the Indian markets logged the fifth straight session of losses, dropping around 1.5 percent on the back of worsening situations between Russia and Ukraine. Russian President Vladimir Putin recognised two breakaway regions in eastern Ukraine as independent on Monday and ordered the Russian army to launch what Moscow called a peacekeeping operation into the area, reported Reuters. It added that Putin told Russia's defence ministry to deploy troops into the two regions to "keep the peace" in a decree.
At an emergency meeting called by the United Nations Security Council post the development, India said that the escalations of tensions between Russia and Ukraine were a matter of great concern and de-escalation of the crisis should remain a priority.
But now that a war-like scenario looks more and more likely, investors across the globe seem to be panicking and withdrawing money from equities to invest in more safe-haven assets like gold leading to a sharp upside in the precious metal.
Indian benchmark Nifty has tanked over 9 percent from its record high of 18,604, hit in October last year and as per experts, the weakness is likely to continue in the near term.
So what should investors do? Should they sell and invest in safe-haven assets on fears of a bigger fall or should they take this opportunity and buy quality stocks at low prices? Let's see what experts have to say.
According to Naveen Kulkarni, Chief Investment Officer, Axis Securities, the volatility in markets because of geopolitical issues linked to Russia and Ukraine should not last long. He added that the chances of a major flare-up look small while sanctions on Russia are expected not to be as strong as the ones against Iran, as no one wants crude prices to stay at elevated levels on the back of already high inflation.
Kulkarni advises investors that markets below 17,000 offer a good risk-reward tradeoff and one should use this correction to gradually increase equity exposure by investing in quality companies.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services agrees. He said that buying opportunities may emerge in this correction but cautioned investors to not rush in to buy. He added that the continued FII selling and surging crude oil prices will lead to further correction of some high-quality stocks which can provide a good buy opportunity.
Ajit Mishra, VP - Research, Religare Broking recommended limiting positions and keeping existing hedged until the markets stabilise.
"Markets are in wait and watch mode in line with global peers and closely monitoring the Russia-Ukraine crisis for cues. Meanwhile, the volatile swings in the index combined with the selling in broader markets are making traders’ life difficult. We thus recommend limiting positions and keeping the existing hedged until the markets stabilise," he said.
On the technical aspect, Nagaraj Shetti, Technical Research Analyst, HDFC Securities said, "the short-term trend of Nifty continues to be choppy with range bound action. Still, there is no strong evidence of Nifty forming bottom reversals around the support of 17,100 levels. Further weakness from here could open a next downside target of 16,800 in the near term. Immediate resistance is placed at 17,350 levels."
So while the Indian markets are likely to remain under pressure in the near term, it can provide a great opportunity for investors to shop for some quality stocks at lower valuations. However, one must remain cautious and not panic if the situation worsens further as there are chances of reciprocal action by the US and its allied countries.
Investors must also contact their financial advisors and brokerages to get a clear picture and understand the risks before making any investments in such a destabilising situation.
