Indian stock market witnessed remarkable recovery on Friday tracking global positive cues from global markets. Benchmark indices closed over 2 per cent higher, after seven consecutive session of losses.

Panic and fear receded as the US stocks rose indicating that the Russia Ukraine conflict may not bring a complete halt to the global trade and escalate into a major war. Sensex rose 2.44 percent or 1,328 points to close at 55,858. The Nifty index gained 2.53 percent or 410 points to close at 16658. In the US, the Nasdaq index rose by 3.44 percent on Thursday, S&P gained 1.5 percent and Dow Jones was up by 0.28 percent. The rise in these indices was in stark contrast to the world markets that fell between 2 percent to 5 percent on Thursday. Experts say that the fall in Indian markets was steep on Thursday’s since the Russia invasion of Ukraine collided with monthly expiry of equity derivatives in India. Volatility is high on the day of monthly expiry since traders are either trying to come out of their positions or roll over to the next month. On Friday too, the US stock futures were indicating a positive opening for the markets. The US markets were higher since it is believed that the Federal Reserve rate hike may not be aggressive this year due to the market crash.

Vinod Nair, Head of Research at Geojit Financial Services said, “Domestic indices staged a firm recovery tracking positive cues from global markets and took advantage of lower valuations following the massive sell-off in the previous session. Global markets took a breather as the fresh US sanctions did not target Russia’s oil exports nor their access to the Swift global payment network. However, the market will continue to remain volatile tracking new developments in the Russia-Ukraine war.”

While the foreign portfolio investors are selling in the cash segment, they have been net buyers of index and stock futures. It indicates that they were not taking bearish positions or going short on the markets. In February so far, FPIs have been net buyers of index futures worth ₹6,235 crore and stock futures worth ₹18,839 crore. In January, FPIs were net sellers in both the segments. In the cash markets, FPIs have net sellers to the tune of Rs 4,1771 crore, which has vitiated the market sentiments, experts say. Market sentiments in India have been hit due to the Russia Ukraine conflict as it is believed that oil prices may remain high as long as geopolitical tensions continue. High oil prices severely impact India as the country is a net importer of oil and it also pushes up inflation, which can push the global central bank towards hiking interest rates. “Spike in energy prices could impact net oil importing nations such as India vulnerable as a $10 move in crude has an impact of 0.4 percent approximately on India’s current account deficit (CAD). The Government in the Budget has projected FY23 GDP at 8-8.5% based on one of the assumptions that oil prices will be in a range of $70-75/bbl. Sustained high crude oil prices is expected to put pressure on India’s fiscal deficit given that India is imports more than 80 prcent of its oil requirement,” Aditya Birla Capital sent in a report.

Retail inflation

India’s retail inflation touched a 7-month high of 6.01 percent in January 2022 and hit the upper end of the RBI’s target range of 4 percent (+/-2) for the first time since June 2021. Inflation print is likely to stay in the elevated zone in February 2022 release as well, the report said. According to Anu Jain, head broking IIFL Wealth, markets would remain volatile in the short term and Thursday’s low of 16203 on Nifty was an important level to watch. “Prices have given a negative confirmation with a break below the multiple support zone of 16800-16900 coinciding with the 200 day Moving average which on the upside could act as immediate resistance. In the short-term sustainability below 16400 would indicate weakness for 15900 levels & broad range for the Market could be 15800-17050 levels. Global Markets have retraced back to important support levels and a temporary pullback and consolidation remains a probable scenario,” Jain said.

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