The domestic benchmarks started the week on a bearish note, following sell-off in global equities as fear of potential invasion of Ukraine by Russia, a top oil producing country, sent crude oil prices above $95 per barrel. The BSE Sensex declined as much as 1,540 points in opening trade, and the NSE Nifty tumbled 458 points amid broad-based selling in the market. All the sectoral indices were in red, while metal and bankex sectors declined the most.
Paring some of the early losses, the BSE Sensex was trading 1,027 points, or 1.77%, lower at 57,125, and the NSE Nifty was at 17,039, down by 336 points, or by 1.93%, at 10:30 AM.
In line with benchmark indices, the broader market also witnessed a surge in selling, with midcap and smallcap indices trading down by 1.95% and 2.2%, respectively.
"Sentiments have turned very negative for the short-term with the heightened tension over the Ukraine crisis. Weakness in global markets is the direct fallout of the Ukraine crisis. Crude at an eight year high is another major macro concern for India. If crude remains at levels of $95 for an extended period of time, the RBI will be forced to revise upwards its 4.5% CPI inflation projection for FY23. Continuation of the accommodative monetary stance too will be difficult. While all these are negatives, diffusion of the Ukraine crisis can trigger a sharp rebound in markets led by large-cap bluechips,” says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Here are five factors that dragged Dalal Street lower on Monday:
Sell-off in index heavyweights
Out of top-30 shares on the BSE Sensex, barring Tata Consultancy Services (TCS), all index heavyweights were flashing red. The top five losers were ITC, Housing Development Finance Corporation, Tata Steel, State Bank of India, and ICICI Bank, which fell up to 4%.
Reliance Industries dropped over 3% in line with broader market. The company in an exchange filing said it has formed a joint venture to deliver satellite-based broadband services in India. Jio Platforms, an arm of Reliance Industries, has teamed up with SES, a global satellite-based content connectivity solutions provider, to form a joint venture – Jio Space Technology – to deliver the next generation scalable and affordable broadband services in India leveraging satellite technology.
Meanwhile, IT major TCS shares were trading higher with more than 2% gain after members of the company approved the buyback of shares worth up to ₹18,000 crore by passing a special resolution through postal ballot. “The members of the company have approved the buyback by passing a special resolution through postal ballot," the company said in a filing to the BSE. Last month, the board of TCS had approved the buyback of up to 4 crore fully paid-up equity shares of the face value of ₹1 each at ₹4,500 per equity share for ₹18,000 crore.
Record spike in crude prices
Brent crude prices breached $95 a barrel to hit seven-year high on Monday as fear of an invasion of Ukraine by Russia rattled investors’ sentiments. Investors feared that rising geopolitical tensions may lead to further supply disruptions in an already-tight market and would add inflationary pressure on the economy. The strong rally in crude prices would also impact margins of oil marketing companies.
During the early Asian trading hours, the global benchmark Brent oil futures rose 1.4% to $95.75 per barrel, while the U.S. West Texas Intermediate (WTI) crude futures jumped 1.65% to $94.65 a barrel.
On Friday, Brent crude futures settled 3.3% higher at $94.44 a barrel, while U.S. WTI crude surged 3.6% to $93.10 per barrel.
Weak global cues
The strong selling in global equities also injected negativity in the domestic market. Shares in the Asia-Pacific region dropped on Monday as escalating tensions between Ukraine and Russia and fear of rate hike by the U.S. central bank dented market sentiment. The Japanese stock market was the biggest loser in the region, with the benchmark Nikkei 225 plummeting 2.6% following negative cues from Wall Street.
On Friday, all three major U.S. indices closed lower on Wall Street as prospect of aggressive policy stance from the Federal Reserve and escalating geopolitical tensions between Russia and Ukraine triggered sell-off in the market. The Dow Jones Industrial Average ended 1.43% lower, the S&P 500 tumbled 1.90%, and the Nasdaq Composite plunged 2.78%.
The escalating geopolitical tensions between Ukraine and Russia also triggered sell-off in the domestic equity market. As per media report, Russia has concentrated more than 1,00,000 troops near Ukraine's border and has sent troops to exercises in neighbouring Belarus. Meanwhile, NATO forces are also heading to the alliance's eastern borders to respond to a possible crisis in Eastern Europe if Russia invades neighbouring Ukraine and fighting breaks out.
U.S. Federal Reserve minutes
Investors also kept a close eye on the U.S. Federal Reserve’s minutes, scheduled to be released on February 16, for directional cues. Investors are grappling with the prospect of aggressive monetary policy stance by the U.S. central bank in the backdrop of record rise in inflation and strong macro data. The fear of multiple rate hikes by the Fed added to the volatility in the market.