Russia-Ukraine Crisis: market extends selling, Over 100 smallcaps shed 10-22%

Due to several variables, such as the Russia-Ukraine situation, rising crude oil prices, F & O expiry, and persistent FII selling, the market extended its selling for the third consecutive week, which ended on February 25 amid extreme volatility.

The BSE Sensex fell 1,974.45 points (3.41 percent) last week to finish at 55,858.52, while the Nifty50 fell 617.9 points (3.57 percent) to finish at 16,658.40.

All of the sectors indices concluded in the red, with the Nifty Media index down 7.6%, the PSU Bank index down 5.7 percent, and the Auto index down 4.6 percent.

The BSE Midcap index dropped 2.5 percent, while the Smallcap index dropped 4.6 percent.

Among the 141 small-cap stocks that fell 10–22 percent were Tata Teleservices (Maharashtra), Aegis Logistics, Urja Global, Sadbhav Infrastructure Projects, Soril Infra Resources, Olectra Greentech, Indiabulls Housing Finance, Syncom Formulations, Gayatri Projects, GE T&D India, R Systems International, Bharat Road Network, Elgi Equipments, Brightcom Group, and Cantabil Retail India.

Salasar Techno Engineering, Orient Bell, Garware Hi-Tech Films, Federal-Mogul Goetze, Vadilal Industries, Dixon Technologies, Forbes Gokak, Globus Spirits, and Sunteck Realty, on the other hand, increased by 8–18%.

Our markets started the week on a sluggish note on Monday as uncertainty with respect to Russia and Ukraine was still looming over us. Due to this tentativeness, the volatility increased a bit and the Nifty kept flirting with the key support zone of 17000–16800 for nearly three sessions,” said Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One.

However, on Thursday, Russia finally invaded its neighbouring country, which caused a complete outburst of fear across the global financial markets. We were certainly not spared from it and, as a result, the Nifty opened with a massive cut and, as the day progressed, the sell-off escalated to thrash all immediate supports one after another. Before anyone could realize, Nifty slid to 16200, which was the lowest level in the last seven months.”

“Things looked extremely bleak at one point but fortunately globally there was some relief and hence, our market too had a sharp recovery on Friday to recoup some portion of losses. Despite this, Nifty ended the week below 16700 with a cut of over three and a half percent from the previous weekly close,” Chavan added.

Rajesh Exports, Ajanta Pharma, Zee Entertainment Enterprises, Bank Of India, Balkrishna Industries, Shriram Transport Finance Corporation, Bharat Heavy Electricals, New India Assurance Company, LIC Housing Finance, Indraprastha Gas, Kansai Nerolac Paints, Sun TV Network, Canara Bank, Power Finance Corporation, and Natco Pharma all dropped between 8 and 13 percent on the BSE Midcap index.

Tata Teleservices (Maharashtra), Aegis Logistics, Indiabulls Housing Finance, Elgi Equipments, Brightcom Group, Indus Towers, Restaurant Brands Asia, IRB Infrastructure Developers, Gulf Oil Lubricants India, HEG, Rajesh Exports, and Rain Industries all plummeted 3.5 percent on the BSE 500 index.

“Nifty started the week around 17200, but we witnessed significant volatility throughout the week. Initially it seemed that markets have formed a support base at 16800 as it rebounded again from that level, but the same was breached with a gap down opening on the February expiry day. Nifty ended expiry session a tad above 16200, but it recovered on Friday with a gap up and ended the week above 16650,” said Ruchit Jain, Lead Research,

“It was indeed a difficult week for traders as volatility was much higher in the markets, which led to swings on both sides. The escalated geopolitical tensions between Russia and Ukraine created panic amongst market participants on the expiry day, which led to a deep cut.”

“However, off late our markets have been reacting more to the global developments only and hence a recovery in the global markets led to a recovery in our indices as well on Friday,” Jain added.

What is the future of the Nifty 50?

Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services:

While the markets have retreated, volatility is predicted to stay strong in the coming days. Over the weekend, the market will keep a close eye on the ongoing Russia-Ukraine conflict for any new developments.

In the short term, the low of 16200 on Thursday may operate as a significant support. While traders should be wary of sudden price swings, investors should take advantage of the present sell-off to gradually add solid blue-chip businesses to their portfolios.

Ajit Mishra, VP – Research, Religare Broking:

Participants should not expect too much of a single-day rebound and should wait for more information. In the event of a further rally, the 16,850–17,000 zone would be a key resistance level for Nifty.

The impending uncertainty over global tensions, along with rising crude prices, will put players on guard in the coming sessions. As a result, we advise staying light and selective until the crisis calms down.

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas:

The Nifty’s swing low of 16203 is a significant support level. The Nifty found resistance near 16800 on the upside.

The level of 16800, which was previously a critical support, is now acting as a resistance.Unless that level is breached on a closing basis, the index may consolidate in the 16200-16800 region.

On the other hand, if 16800 is crossed on a closing basis, the index may attempt a greater rebound toward 17200-17300.

Vinod Nair, Head of Research at Geojit Financial Services:

Investors will be careful in the future, closely monitoring developments in the Russia-Ukraine conflict. In such a turbulent market, having a well-balanced portfolio with a mix of stocks, debt, gold, and cash is wise.

It’s also a hectic week for macroeconomic data releases, such as domestic GDP and Manufacturing & Production PMI data.

Yesha Shah, Head of Equity Research, Samco Securities:

Prevalent geopolitical concerns will continue to take centre stage, with market direction and investor sentiment being influenced by them.

Markets may plunge much deeper into the Red Sea if the current confrontation between Russia and Ukraine continues. In addition, the domestic economic calendar will have an impact on D-Street in the next week, as quarterly GDP numbers, auto sales figures, and manufacturing PMI readings are all due.

Given the many trigger points and mounting uncertainty, investors are advised to exercise extreme caution and avoid any aggressive trades in the short term.