The ongoing Ukraine Russia war has changed the equity landscape as we know it. On February 24, 2022, Russia declared war on Ukraine by announcing military operations on its neighbour. As the world grapples with a deadly pandemic, Russia's recent actions are likely to further add to the hardships for recovering economies around the world, including India. Alarmingly only a day war between Russia and Ukraine caused massive losses in the stock market, further spurring an emergency meeting between Prime Minister Modi and Finance Minister Nirmala Sitharaman on the evening of 24th February.
THE GLOBAL MARKET TAKES A HIT
The global market was set in a more turbulent week after Western nations announced on 3rd March 2022 a series of severe sanctions to punish Russia for its decision to invade Ukraine, where fighting intensified. US stocks have already fallen nearly 8% this year, the worst start since 2009, and concerns about the growing conflict in Ukraine have shaken markets around the world. Wall Street closed at a high on Friday, 25th February 2022 and the key index rose but analysts expected the market to be under selling pressure in the coming days. Recent crises can also affect energy and grain prices. Brent futures already exceeded $105 a barrel on Thursday, 24th February 2022, and wheat futures fell slightly after rising to the levels last seen in mid-2008.
HOW RUSSIA-UKRAINE WAR WILL IMPACT INDIA?
Amidst the impending war between the two countries, Indian investors were in a full-on panic mode. On 24th February 2022, more than 8 lakh crores were wiped from the Indian stock market. Sensex was down 1,926 points to 55305. The broader Nifty was at 16,483, down by 580 points. As the war between Russia and Ukraine intensified, the major index Sensex fell by almost 3% within 24th Feb - 03rd March 2022.
Where imports are concerned, India imports more than 80% of oil demand in the country, and oil imports account for about 25% of the total imports. This is worrisome because it could pose another risk to rising inflation in India as the war between Russia and Ukraine could lead to higher oil prices. Even Indian Households will not be spared from this domino effect. As of today, Ukraine and Russia together account for 90% of India's sunflower oil imports. Ukraine reportedly failed to ship sunflower oil even once in February amid tensions with Russia. If the tension between these two countries continues, the Indian market will be under a lot of pressure if oil reserves are not replenished. Also, the war can have a direct impact on freight transport, making foodstuffs such as fruits, vegetables, oil, and legumes more expensive. Apart from the Oil, Edible Oil, and Agriculture sector, Pharmaceuticals are one of the major exports from India to Ukraine. India is the third-largest exporter of medicines to Ukraine, followed by Germany and France. The crisis is felt more by the pharma sector due to the presence of domestic players like Dr Reddy’s & Sun Pharma which are located in both countries.
Given below is the snapshot of the performance of some of the stocks within the turbulent period of 24th February 2022-03rd March 2022.
BUT ALL IS NOT BLEAK…
India has an opportunity to benefit from this geopolitical fiasco in the metal sector. The inability to export metal from Russia has provided Indian metal producers with a unique opportunity to fill the gap. Metal stocks recorded top gains in weak markets as prices of most metals rose for fear of supply shortages from Russia, a major metal producer. The sanctions imposed and the deterioration of relations with the state will affect Russia's overall trade. Rusal, a Russian aluminium producer, is reported to have stopped production at the Nikolaev Alumina Refinery in Ukraine due to logistics challenges in and around the Black Sea. It is also reported that Russia supplies the world with about 10% of the world's nickel. Nickel is used in the manufacture of stainless steel and batteries for electric vehicles. National Aluminium Company, Hindalco Industries, Bharat Aluminium Company, and Vedanta Aluminium are some of India's leading aluminium producers. Metal companies were outliers in the weak market on March 2, with Sensex dropping nearly 2% due to turbulent global signal during the ongoing war between Russia and Ukraine, making Metal one of the biggest winners on the market.
Given below is the percentage change of some of the leading Indian metal stocks within the time period of 24th February- 03rd March 2022.
CONCLUSION
Indian investors have been confused since the inception of the war between Russia and Ukraine. The stock market is cyclically disrupted by a variety of factors. Two years ago, it was a pandemic. Now it's a war. Investors are requested to avoid panic, even while time is being tested. Often it is not necessary to record a loss in order to liquidate an investment in a hurry. Sometimes it's best to stay in place. Ongoing eddy can result in short-term losses. But if it doesn't affect your long-term financial planning and investment goals, it will help as the market is bound to bounce back and give returns to those who have remained invested.
Good one💯