Russia-Ukraine War: An opportunity amid crisis for investors?

The surprise attack by Russia on Ukraine rattled the stock markets across the world, including India, which saw domestic benchmarks correcting 5% on a single day on Thursday and ended the week with nearly 3.5% cut.  

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The cut would have been even more severe if not for the bounceback by Nifty and the Sensex which gained 2.5% and 2.4% respectively on the last trading day of the week. As anxieties grew, the India VIX to shot up to its highest level since June 2020.  

The week also saw brent crude crossing $100 a barrel for the first time since 2014 due to concerns about tight supply and rising demand as US imposed fresh sanctions on Russia.  

As stock markets have corrected significantly, a majority of the analysts and experts are of the view that this could be a blessing in disguise and investors can take it as an opportunity to build a strong portfolio by taking positions in fundamentally sound stocks. Some of them also suggested 'wait and watch' strategy before more clarity emerges on the Russia-Ukraine front.  

Nifty earnings remain robust

Yesha Shah, Head of Equity Research, Samco Securities, says though everything appears bleak at the moment, one bright spot to consider as the results season winds down is the earnings performance of Nifty in the most recent quarter. "Earnings, which help assess market resilience, remained strong, with Nifty constituents seeing more beats than misses," said the expert.  

The top line and bottom line of Nifty components rose at high double-digit rates on a year-over-year basis, as well as at healthy rates sequentially.  

Capital goods, banks, power, IT, metals are among sectors that did relatively well, whereas auto, pharma, and cement had a tough quarter.  

High inflation, which resulted in falling margins, was a source of pain for many businesses.  

"Given the present jump in commodity and crude prices as a result of the geopolitical scenario, inflation may rise more in the future.  This is undoubtedly a short-term threat for businesses and may postpone the economy's broad-based recovery. However, given that corporate profits have remained resilient, that management guidance across sectors has been mainly positive, and that India is experiencing many structural tailwinds, the current collapse in our markets appears to be transient," said Shah.  

Opportunity for long-term investors 

While such corrections cause fear, they also provide long-term investors a window to buy, says Shah.  

"This rhetoric is also visible in the fact that DIIs have absorbed all of the selling undertaken by FIIs from Monday to Thursday this week.  Investors are therefore encouraged to use this crisis as an opportunity and gradually build up long-term holdings in quality companies," he added.  

Vijay Chandok - MD & CEO, ICICI Securities says medium to long term thesis on Indian equities remain intact amid economic recovery as reflected by key macroeconomic indicators, strong capex spends and robust corporate earnings (Nifty earnings growth likely at 21.5 % CAGR over FY21-24). "We continue to see this correction as an opportunity for the investors to add on the companies with sustainable growth visibility," he added 

Nitin Raheja, Executive Director, Head – Discretionary Equities, Julius Baer, says the current correction is more of a bull market correction which tends to be in the range of 12-15% on an average. "A large part of which has been done till date. Further individual stocks have corrected even more and there is a case for gradually buying into the markets using a bottom-up stock specific approach," said Raheja

Wait and watch for more clarity 

Ravi Singh, Vice President and Head of Research, Shareindia, believes that investors should employ rather cautious stance at current juncture.  

"Nifty may touch the level of 15500 in this scenario. It is advisable that all investors should follow a wait and watch strategy and avoid any fresh entry at the current juncture. Long term investors having an investment horizon of 3-5 years will get a good opportunity to avert their portfolio once the global situation stabilizes," says Singh.  

Balanced portfolio 

Going ahead investors will continue to remain cautious by keenly watching the developments in the Russia-Ukraine war, says Vinod Nair, Head of Research at Geojit Financial Services. "In such a volatile market a prudent approach is to have a balanced portfolio with a mix of equity, debt, gold, and cash, " he suggests investors.

Technical Outlook  

Nifty50 index closed on a strongly negative note for the week breaking below the crucial support zone around 16,800 levels. Albeit the sharp rebound seen on Friday, the index failed to recoup all the losses. Also, there has been structural damage to the ongoing major trend due to which this recovery seems less sustainable, says Samco Securities Head of Equity Research,  

"The bounce, hence, can be a good exit opportunity for short-term traders. Until Nifty breaks above 17,500 levels, we suggest traders maintain a bearish outlook. Immediate support and resistance are now placed at 16,200 and 16,900 levels," says Shah

Ajit Mishra, VP Research. Religare Broking, says next major support for Nifty is around 15,900-16,000 zone. "To negate the view, it should reclaim the 17,000 zones decisively and the next major hurdle would be around the 17,300 zones. The prevailing volatility is hard to trade, we thus suggest traders limit positions and wait for some stability. Investors, on the other hand, should use this phase to accumulate quality stocks on dips," he added.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)