Ukraine-Russia crisis: Why Indian investors shouldn’t panic over falling stocks and soaring oil prices

NEW DELHI: Stock markets around the world experienced a bloodbath on Tuesday after a deepening crisis between Ukraine and Russia sent stocks tumbling and crude oil rising.
On Monday evening, Russian President Vladimir Putin sent troops to two breakaway regions in eastern Ukraine run by Moscow-backed separatists. He recognized Donetsk and Luhansk territories as independent states in a televised address. The United States, the United Kingdom, Europe and other countries have condemned the decision and threatened to impose severe sanctions. Ukrainian President Zelensky, in his own late-night speech, said Ukraine was not afraid and would not give in to anyone.
As countries are economically, politically and socially interdependent, stock markets are sensitive to these developments and react strongly to them. This is why a geopolitical risk taking place thousands of kilometers from New Delhi has impacted the Indian stock markets. The Sensex, which was near its all-time high in January at around 61,000, is now at 57,000.
On Tuesday morning, India’s benchmark Sensex fell 1,000 points in just half an hour amid rising bellicose tensions between Russia and Ukraine. Brent crude futures rose 2.1% to $97.44, a new seven-year high, on fears that energy exports from Russia could be disrupted. Since Russia is one of the world’s leading oil producers, any Western sanctions would disrupt the global oil supply. The rupee also fell 33 paisa or 0.44% to 74.84 to the dollar.
The consequences of a war-like scenario would be higher oil prices, a sell-off in stocks, and people would flock to safe-haven assets like bonds, gold, and the Japanese yen. In India, investor sentiment took a hit. Over the past few days, foreign portfolio investors have turned net sellers and withdrew a net amount of Rs 51,703 crore from Indian stocks between January and February.
Domestic streams now have more weight than foreign investorsso sit well
“The reason for Sensex’s fall today is due to the crisis in Russia and Ukraine, the possibility of a trade war, high US inflation and GDP imbalance in the US. This has led to an increase in US bond yields, which also led to the selling of emerging markets like India.In the Indian market, foreign institutional investors sold nearly Rs 130,000 crore in the past five months, but the market n is down only 10% due to domestic inflows The market will be volatile due to the macroeconomic situation, but we will do much better internally than the rest of the global economy as GDP and inflation India are on the right track. Domestic institutional investors and mutual fund inflows now outweigh FII outflows,” said Gaurav Garg, Head of Research at CapitalVia Global Re search.
Garg’s advice to investors is to sit still, book profits at higher levels and invest at lower levels. “Today all broad indices are down, as well as large cap stocks. Investors need to add blue chip stocks in select IT, metals and banking stocks,” he said.
Buy gold, please
Bullion is considered a hedge against inflation and geopolitical risks. Gold prices hit a nearly nine-month high on Tuesday as the situation in Eastern Europe intensified, supporting demand for safe-haven bullion. “The most direct impact will be on oil prices and its impact on inflation and interest rates, so it is always prudent to have an allocation to gold. “Inflationary environments, gold generally outperforms. It was up during 9/11, the global financial crisis and in March 2020 at the start of the pandemic,” said Atanuu Agarrwal. machine learning and is the founder of Upside AI.
Opt for SIPs, instead of flat-rate investments
An escalation in the crisis would mean sanctions on Russia, the world’s second largest exporter of crude oil, and oil prices, which have already risen 40% since December, could reach the frightening territory of $100 and above a barrel. The Indian government would have to impose fuel subsidies in such a case, and continued high crude oil prices would upset the country’s budget calculations. “Sectors that will benefit will be downstream energy stocks, and the banking and NBFC sectors would also benefit from higher interest rates. We expect volatility to continue until sanctions and hikes rates are clear. Investors should focus on dollar cost averaging or SIPs instead of lump sum investments in such market conditions,” says Sonam Srivastava, Founder of Wright Research.
View the decline as a buying opportunity since the political fallout is short-lived
Ideally, if you are a long-term investor, it is time to ignore these macroeconomic developments and plan a gradual entry into long-term portfolios because history has shown that the fallout from geopolitical events is rather short-lived. .
“Over the past 3 decades we have seen at least a dozen such events and each of them has proven to be a buying opportunity for those looking for long-term gains. In 24 out of 29 major geopolitical events, dating back to World War II, markets have seen positive returns a year later. Even a massively negative event like 9/11 only sent Indian markets down 2% after a year,” says Deepak Shenoy, who manages small businesses based on Momentum and is the founder of Capital Mind.
Truist Advisory Services reviewed 12 historic events, including the Iraq war of 2003, the crisis of the Iranian hostages in 1979 and the crisis of the 1962 Cuban Missile The S & P 500 was higher one year after the events in nine of 12 times, with an average gain of 8.6%, Reuters reported
Another CFRA research that analyzed 24 events since World War II found that the S&P 500 fell an average of 5.5% from peak to trough following these events. The market took an average of 24 days from the start of the event to bottom out, but it recovered those losses an average of 28 days later.
“For an investor, it is best to assume that the markets would normally fall by up to 30% even without such events, and we are only -10% from the top. The simplest strategy would be to invest in games over the next year, rather than trying to time them today Diversify markets, build your portfolio over time, and be aware that markets can do much worse than they have Shenoy added.
We are in a structured bull run, so stay invested in quality stocks
“The overall trend is bullish, but we could have high volatility over the next month, so short-term traders should stay light while long-term investors should view this correction as a buying opportunity. We are very bullish on capital goods, infrastructure, real estate, banking, consumer goods and auto accessories, so we advise investors to look for buying opportunities in these areas,” says Parth Nyati , founder of Tradingo.
Meanwhile, Santosh Meena, head of research at Swastika Investmart Ltd, is bullish on IT and autos.
• The long term should stay invested and look for buying opportunities in this correction because we are in a structural bull run where the bull market will remain intact even Nifty corrects another 10-20% from here.
• Investors should focus on the national economy against sectors such as capital goods, infrastructure, real estate, banking, etc.
• The information technology sector can continue to perform well where the current correction is an opportunity to add quality stocks.
• The automotive sector also offers favorable risk-return opportunities after a period of underperformance.
Adhil Shetty, CEO has the following advice on how to protect your investments from this inevitable turbulence:
Do not panic : As you tackle a volatile market, a panicked investment decision may be your worst bet. Don’t believe hearsay and check the news before you act. Hasty decisions can lead to catastrophic losses. Remember that stocks serve investors best when they spend time in the market and stay invested for the long term.
Buy the dip: Intrepid investors love these opportunities because the market is trading at a discount. Such volatility presents an opportunity to buy low and increase margins once uncertainties dissipate and markets rebound.
Double-check your financial goals: Your financial goals should guide you through these uncertain times. Re-evaluate your financial goals and decide whether to stay invested or exit.
Diversify your investment: This is also a good time to assess the diversification of your portfolio. A stock-heavy portfolio will suffer short-term losses due to prevailing geopolitical risks. However, a diversified portfolio with bonds and gold can better absorb losses. It’s always a good idea to diversify your investments. This will mitigate your losses on risky assets and offset you with the gains you make on less lucrative but safer assets.
Avoid hasty financial decisions: You may want to rush from equity investments to debt securities now that markets are correcting, but don’t rush rebalancing. Only do this if your investment plan requires it. In fact, falling stocks may mean you now need to send more of your debt into stocks to restore balance. If you don’t want to decide now, just wait for the market to improve. Then take a call.