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Nifty, Sensex crash about 3% each: 3 factors are dragging the market

Both the Nifty 50 and Sensex index hit their lowest levels since mid-December amid high risk aversion.

Mumbai / February 24, 2022 / 10:13 AM IST

Domestic benchmark equity indices entered correction territory for only the second time since the crash in March 2020 as Russian President Vladimir Putin announced military operations in Eastern Ukraine on February 24.

The Nifty 50 and Sensex have now fallen more than 10 percent from their recent highs after the brief recovery seen in January. Both the benchmark indices were at their lowest levels since mid-December.

Russian President in a televised address said that the country will launch special military operations in Easter Ukraine. Russia’s action comes days after the country recognized the independence of two separatist regions in Easter Ukraine following a speech by Putin.

"The growing concern surrounding the deteriorating Ukraine crisis has pushed global stock markets into correction mode. Investors should wait and watch the unfolding situation before taking any major commitments," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

At 9:30 am, the Nifty 50 index was down 2.4 percent, or 414.5 points, at 16,651. The BSE-Sensex was down 1,726 points or 2.6 percent at 55,867 points.

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Let's examine the main factors driving risk aversion among investors:

Russia makes its move

Russian forces were reportedly bombarding certain Ukrainian cities even before Putin's address ended that announced launch of special military action in Eastern Ukraine. Russia's action is possibly a worst-case scenario from investors' perspective. Although a lot will depend on how North Atlantic Treat Organisation reacts to Russia's action.

Catch all updates on Russia-Ukraine tensions here

Crude oil at $100

For India, the risk aversion in the global market is made worse by the fact that global crude oil prices topped $100 per barrel for the first time since 2014 due to the Russia-Ukraine crisis. Traders fear Russia could face sanctions that could hurt its ability to export oil, which could further hit supply.

Expiry of F&O series

The crisis in Ukraine is unfolding at the worst possible time for traders given that the February derivatives series will expire later today. The expiry of derivative contracts will cause additional volatility on top of what is being caused by geopolitical risks. The India VIX index topped 30 points, up 22 percent in its biggest move in many months.

The sell-off in the broader market was more severe than largecap indices with Nifty Midcap 100 and Nifty Smallcap 100 index falling 2.6 percent and 2.9 percent respectively.

Among sectors, real estate, metals, state-owned banks and media stocks were the worst hit followed by banks and information technology scrips. The Nifty Bank index slid 2.9 percent, underperforming the Nifty 50 and was responsible for majority of the losses on the Nifty.

Shares of aviation companies, tyre companies and paint companies were under pressure as crude oil prices rose to further compound input costs inflation for such companies.

Overall, the breadth of the market was extremely weak as 19 stocks fell for every one stock that rose on the National Stock Exchange.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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Chiranjivi Chakraborty
first published: Feb 24, 2022 10:05 am
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