Russia-Ukraine crisis, FIIs, GDP data, auto sales figures; here’s what will move market this week

The domestic benchmark indices witnessed high volatility last week due to escalated geopolitical tensions between Russia and Ukraine, a record rise in crude prices, sustained selling by foreign investors, and monthly F&O expiry. On Thursday, the Sensex and the Nifty witnessed one the worst performance in the recent past after Russia launched a full-scale war against Ukraine, which prompted several Western Countries to impose harsh sanctions against Moscow. On a weekly basis, the 30-share BSE Sensex dropped 1,610 points or 2.8%, and the 50-share NSE Nifty plunged 451 points or 2.64%.

The equity market is expected to remain on edge this week amid a slew of key macroeconomic data, ongoing state elections, and geopolitical tensions in Eastern Europe. The developments in the Russia-Ukraine war will have a major impact on global equities including India, depending on whether it is positive or negative from the market perspective.

It will be an action-packed week for Dalal Street as Gross Domestic Product (GDP) numbers for December quarter and Infrastructure Output data for January will be released on February 28. Traders will also keep a track on Manufacturing and Services PMI data, scheduled to be released during the week. Sectorally, auto and cement companies will also release their monthly sales figures during the forthcoming week.

On the global front, traders will keep an eye on a host of macro reports from the world’s largest economy, United States. During the week, Jobless Claims, Manufacturing PMI, Markit Services PMI Final, Wholesale Inventories, Chicago, and Baker Hughes Oil Rig Count will be released by the U.S. Investors will also keep an eye on the President Biden State of the Union Speech on March 1.

Here are key factors that will set tone for stock market this week:

Russia-Ukraine crisis

The ongoing Russia-Ukraine conflict could be double whammy for Indian markets. On one hand, it will affect Indian companies with exposure to Europe and Russia, while on the other hand, it will lead to sustained increase in oil and food prices, which may add inflationary pressure to the economy.

The latest Asia Insights report of Nomura says the adverse impact will be manifested through higher inflation, weaker current account and fiscal balances, and a squeeze on economic growth. India, Thailand, and the Philippines could be the biggest losers, it says.

Rising crude price

The Russian invasion of Ukraine pushed Brent crude above $100 a barrel for the first time in over seven years. Traders fear that the fresh harsh sanctions against Russia, one of the major oil producers, may impact oil exports. According to a recent report by ICICI Securities, oil prices are likely to remain elevated (well above $90/bbl) for several months, once the U.S. imposes additional sanctions on Russia (including its ability to export oil and gas) following a possible Russian invasion of Ukraine.

High crude prices are a huge negative for India, which imports around 86% of its annual crude oil requirement. It will have a direct impact on India's foreign exchange outgo, fiscal deficit and inflation numbers. From the companies perspective, it will impact margins of Indian refiners such as Reliance Industries (RIL), Indian Oil, HPCL, and BPCL.

GDP data

The Ministry of Statistics and Programme Implementation is set to release Gross Domestic Product (GDP) numbers for December quarter of 2021 at 5:30pm on February 28. According to economists at State Bank of India (SBI), India’s GDP is likely to grow at 5.8% in the third quarter of the current fiscal.

The country’s GDP grew at a pace of 8.4% in the second quarter (Jul-September) of the current financial year, against a contraction of 7.4% during the same period of the previous financial year.

Last week, global ratings agency Moody’s revised its economic growth projections for India during the calendar year 2022 to 9.5% from 7% back in November 2021. The upgrade in India’s GDP growth prospects were underpinned by strong recovery momentum and focus on capital expenditure in the latest Union Budget, the agency said in its latest update of global macroeconmic outlook.

Monthly auto sales

Investors will also keep an eye on the monthly sales figures of the automobile companies. Major auto companies such as Maruti, Tata Motors, Hero MotoCorp, and Bajaj Auto will be releasing their sales numbers for February during the forthcoming week.

Last month, barring Maruti and Bajaj Auto, all other major companies reported decent sales in January.

LIC IPO

The Union Cabinet on Saturday reportedly approved a policy amendment allowing foreign direct investment of up to 20% in Life Insurance Corp of India (LIC). The tweak in the rule would allow foreign direct investors to buy up to 20% of LIC's shares through an automatic route. Under the existing norms, foreign investors are not permitted to buy shares in the LIC, governed by the special parliament act, while 74% foreign direct investment is allowed in other private insurance companies.

What should investor do?

Given the high uncertainties in the market due to ongoing Ukraine-Russian tensions, investors are likely to remain on edge this week. The high volatility has made investors nervous, especially those who are facing a full-blown bear market for the first time.

Analyst at Geojit Financial Services recommended investors to not panic and sell their bluechip stocks. "Selling during a crisis had never been a good decision. Therefore, investors should not panic and sell. Even though the situation is fluid, this is unlikely to become a prolonged hot conflict. Investors should not panic and sell their bluechip stocks. They can churn portfolios by selling weak stones and buying high quality stocks in IT and financials,” says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.