Sensex and Nifty50 fall as Russia-Ukraine crisis rocks global equities; Should investors buy the dip?

Indian stocks were deep in the red on Tuesday, following weakness in global markets amid growing geopolitical tensions after Russia ordered troops into two regions of eastern Ukraine.

Financials, IT and Oil & Gas stocks were the biggest drags on the two main indices, Sensex and Nifty50, amid a sell-off.

As of 2 p.m., Sensex and Nifty50 were down 1%, having recouped more than half of their intraday losses. The 30-certificate index fell 569.5 points to 57,114.1 and the broader benchmark Nifty index to 17,028.2, down 178.5 points.

Earlier in the day, the Sensex plunged as much as 1,288.7 points or 2.2% for 56,394.9 and the Nifty slipped to 16,843.8, losing as much as 362.9 points or 2.1% from its previous close.

Volatility also persisted ahead of the expiration of monthly derivatives contracts due on Thursday.

All NSE sector gauges were in the red as Nifty Bank managed to recoup three-quarters of its intraday losses. The banking index was down half a percent in late afternoon trading.

As many as 42 Nifty50 shares were below the fixed line, with BPCL, Tata Steel, Tata Motors, TCS, UPL, SBI and SBI Life being the most affected, down 2-4%. In contrast, Infosys, ONGC, Cipla, Eicher Motors and Kotak Mahindra Bank were among the top gainers.

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TCS, SBI, ITC and Tata Steel were the main drags on the two main indices.

Major Factors Harming the Market

Broader markets also weakened, although the Nifty Midcap 100 and Smallcap 100 indices recouped more than half of the day’s losses.

Among the midcap and smallcap segments, Lodha, Vodafone Idea and Dhanvarsha Finvest were among the biggest losers, down 3-11%. On the other hand, Rajesh Exports, Supreme and Indiabulls Real Estate, up 4-12%, were among the top gainers.

What to do in the market now?

“Sector rotation seems to be happening…Front line stocks are looking good now…Banking is the best bet,” AK Prabhakar, head of research at IDBI Capital Markets, told CNBCTV18.com.

Crude oil prices jumped more than $2 a barrel on concerns over supply disruption. Rising crude prices are affecting emerging markets such as India, which meets the lion’s share of its oil demand through imports.

Standard Chartered’s Steve Bryce said in an interview with CNBC-TV18 that crude oil is less likely to hit the $150 a barrel mark, and it remains to be seen how much support the US will have for Ukraine.

He expects the dollar to weaken in the future, but he is of the view that high oil prices will only hurt the economy if they rise above the $150 mark.

Arvind Sanger of Geosphere Capital told CNBC-TV18 he was impressed by the courage of Indian investors. He expects the geopolitical situation to be inflationary and does not see the market bottoming out anytime soon.

Global Markets

European stocks started the day on a weak note following the global sell-off. The pan-European Stoxx 600 index fell 1.9% in early trades before recouping some of those losses.

S&P 500 futures were down 1.3% at last count, suggesting a weak start on Wall Street after a holiday.

(Edited by : Akanksha Upadhyay)