Domestic markets are expected to open on a flat note with beaten-down global equity markets showing some support. Even as the US banned import of Russian oil that helped the crude oil prices to hover around $125 a barrel, the SGX Nifty at 15,940 indicates a flat-to-negative opening for markets. Nifty futures on Tuesday closed at 16,010 on the NSE.
Commodity shock
Not withstanding heavy selling by foreign portfolio investors, Indian stock markets are likely to see some support around current levels, said analysts. According to them, spike in crude oil price is likely to calm down in the coming days to around $80-100 a barrel once the normalcy is restored at geopolitical level. However, rising commodity prices such as gold, nickel, copper and aluminium will put pressure on India Inc for at least two-three quarters.
Most experts believe that market is expected to move in a narrow range in next few days before taking a clear direction.
'Negative implications'
According to domestic brokerage Emkay Global, the ongoing crude and commodities shock in the wake of the Russia-Ukraine conflict is likely to have negative implications for India’s macro situation in terms of higher inflation and bond yields, higher CAD and weaker INR, and potentially weaker consumer demand, and thus a lower GDP growth rate.
"Nonetheless, we find aggregate Nifty profits to be fairly resilient in a downside scenario that assumes: Average Brent crude price of $100/bbl in Q4-FY22 and in FY23, as well as higher metals/palm oil/food prices; and real GDP growth lower by 100bps in FY23 vs. our current estimates, and nominal growth lower by 50bps," it said.
Post strong correction, Indian stocks are at reasonable valuation said analysts.
Siddhartha Khemka, Head — Retail Research, Motilal Oswal Financial Services Ltd, said, after correcting by almost 15 per cent from its January peak, Nifty 1-year forward valuation is now below its 10 year average of 19x.
“Even several large cap blue chip stocks are down 20-30 per cent and are available at reasonable valuations making them attractive for long term investors. However, the near term market direction would continue to be driven by factors like the assembly election outcome, ECB and US Fed meeting - apart from the ongoing Russia-Ukraine conflict,” Khemka added.