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Business News/ Markets / Stock Markets/  Stocks, rupee in free fall, oil soars
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Stocks, rupee in free fall, oil soars

Investors bailed out of risky assets, sending stocks crashing after Russian President Vladimir Putin’s troops invaded Ukraine. On Thursday, the exodus from stocks wiped out ₹1.3 trillion in investor wealth on Indian stock markets.

India’s benchmark indices Sensex and Nifty tumbled, ending 4.72% and 4.78% lower respectively, one of the sharpest daily declines in nearly two years. (Photo: Mint)Premium
India’s benchmark indices Sensex and Nifty tumbled, ending 4.72% and 4.78% lower respectively, one of the sharpest daily declines in nearly two years. (Photo: Mint)

MUMBAI : Investors bailed out of risky assets, sending stocks crashing after Russian President Vladimir Putin’s troops invaded Ukraine. On Thursday, the exodus from stocks wiped out 1.3 trillion in investor wealth on Indian stock markets.

But the bad news for stocks was a boon for safer assets such as gold and government bonds. Crude oil surged past the $100 mark amid expectations of tighter supply.

Conflict whiplashes markets
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Conflict whiplashes markets

India’s benchmark indices Sensex and Nifty tumbled, ending 4.72% and 4.78% lower respectively, one of the sharpest daily declines in nearly two years. The declines put the indices in correction territory—defined as a drop of at least 10% from a recent peak. The Sensex hit a record high of 62,245.43 on 19 October.

A near-6% decline was recorded on 4 May 2020 after the government extended the nationwide lockdown and amid a flare-up in US-China tensions.

The Russian invasion has triggered the worst security crisis in Europe since World War II. The attack on Ukraine heightens the pressure on the global economy already reeling from the pandemic and galloping inflation. Investors fear the unfolding crisis will further increase companies’ raw material and energy costs. Sanctions against Russia by Western powers are likely to isolate the erstwhile superpower, a major producer of oil and commodities.

Global markets, too, saw deep corrections. Among Asian markets, the Hang Seng, Taiwan, Nikkei, Shanghai Composite,and Jakarta Composite ended the day 1.48-3.21% lower.

“The world can ill-afford further disruption in trade and commodities when covid has already weakened sovereign balance sheets," said Amar Ambani, head of institutional equities, Yes Securities.

Brent crude hit $105 a barrel, a level not seen since August 2014, adding to the worries.

S&P Global Platts Analytics said $100 oil aggravates pain as Asia’s top oil importers are dependent on imports for 70-100% of their needs. “High oil prices will dampen demand and undermine the fragile economic recovery," said Lim Jit Yang, adviser for oil markets at S&P Global Platts Analytics.

The concerns are likely to remain elevated. “Crude could stay over $100 a barrel in the medium term unless Opec decides to hike output materially," said Hetal Gandhi, director, Crisil Research. Interestingly, Opec members have failed to meet output targets over the past three months.

The developments come even as India’s recovery remains fragile. “High crude prices could delay the cool-off in inflation, which was expected to go moderate by the second half of 2022," said Naveen Kulkarni, chief investment officer, Axis Securities.

Kulkarni said the developments are leading to volatility in major asset classes, including equity and debt.

“The repercussion of these actions in terms of impact on commodity prices, including crude, supply disruptions and the sanctions that the Western nations can levy, remains uncertain and can result in the next leg down after a brief recovery," said Deepak Jasani, head of retail research, HDFC Securities.

Foreign portfolio investors continued to remain net sellers. FIIs sold 58,408.73 crore worth of equities until 23 February this year, while domestic institutional investors bought 47,883.65 crore equities.

Meanwhile, gold prices rose as investors sought safety. MCX Gold rose 2.91%. However, the rupee continued to weaken. At 75.65 a dollar, the rupee has depreciated by 1.43% over the previous close. Experts said further depreciation cannot be ruled out.

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ABOUT THE AUTHOR
Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 25 Feb 2022, 12:21 AM IST
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