Yesha Shah,Samco Securities
- Stock markets have seen unprecedented volatility, and commodities aren’t far behind as Nifty closed the week down 3.5%
This week, markets throughout the world witnessed bloodbaths as a result of the war-like scenario and geopolitical tensions between Russia and Ukraine. Our frontline indexes, which were not immune to global worries, suffered. This resulted in a 3.58% drop in the week, and as anxieties grew, the India VIX reached its highest level since June’20. Although everything appears to be bleak at the moment, one bright spot to consider as the results season winds down is the earnings performance of the Nifty in the most recent quarter.
Read More: LIC policyholders to get discount in mega IPO: Who can apply and who can’t
Earnings, which help assess market resilience, remained strong, with Nifty constituents seeing more beats than misses. 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. While such corrections cause fear, they also provide long-term investors a window to buy. 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.
Event of the week
Equities have seen unprecedented volatility, and commodities aren’t far behind. Multiple commodity prices have skyrocketed this week as a result of sanctions placed on Russia. For instance, Brent crude, surpassed $100 a barrel for the first time since 2014, owing to concerns about tight supply and rising demand. Furthermore, because Russia produces 6% of the world’s aluminium and 7% of its mined nickel, signals of current constraints deteriorating rocketed their prices.
Read More: Indian Railways cancels 430 trains on 25 Feb, check the full list here
Aluminium prices have reached all-time highs, while nickel prices are approaching decadal highs. Furthermore, as investors sought a safe haven to preserve their capital, gold prices rose to a 13-month high. As these price increases remain a short-term overhang, it is critical to keep an eye on companies that are directly impacted before making investment decisions. However, as global anxieties subside, these prices are also expected to soften.
