Russia has launched an armed forces attack on Ukraine and the event has sent shockwaves across the world. Indian markets have not been immune to the same and have witnessed a massive selloff on Thursday ahead of F&O expiry. However, analysts on Dalal Street advised investors not to panic and stay invested in the quality stocks amid the ongoing uncertainty over Russia and Ukraine.
The benchmark equity index BSE Sensex crashed over 2,000 points in the morning trade after Russian President Vladimir Putin announced a military operation in eastern Ukraine. Meanwhile, oil prices soared and topped the $100 a barrel mark for the first time since 2014.
Market participants were also concerned as India Ratings revised downwards its GDP growth forecast for 2021-22 to 8.6 per cent from the consensus 9.2 per cent projected earlier. Some pessimism also came as foreign institutional investors (FII) remained net sellers of domestic stocks on Wednesday.
Should you panic or stay invested? Nitasha Shankar, head PRS equity research, YES Securities said that this is a time when investors will be tested for their patience and discipline. Markets are choppy and will probably remain this way for some time, but that should not deter a serious investor.
Shankar further added that investors should not panic and continue to stay long in India. She backed her statement with the following five pointers:
1) Balance sheets stronger-than-ever: India’s corporate health is the strongest in a long time -- deleveraging has been seen across sectors and cash reserves have surged. As a result, corporate confidence is high.
2) Promoters are optimistic about the business potential: This reflects in the increasing promoter holding in Nifty500 over time, increasing from 32 per cent to 45 per cent over the last decade. Interestingly, post-Covid, promoters have increased their stake by around 3 per cent.
3) Capital expenditure (capex): Private capex cycle is making a comeback. On the other hand, public capital expenditure is still strong with the government giving an impetus even in the recent Union Budget. The Budget has put in place a virtuous cycle that would drive a multiyear growth cycle by focusing on sustaining economic recovery through demand-side measures and supply-side reforms to kick-start the investment cycle and encourage private sector participation.
4) China plus one: The strategy is helping to drive demand in specific sectors. Also, the green energy transition for India is opening up a whole new investment opportunity for investors.
5) PLI scheme: The scheme is a big game-changer that is encouraging and supporting domestic production.
“Moving in and out of investments based on undue reliance on recent performance is likely to result in excessive trading and inferior performance results. This is the time to revisit the basics, have confidence in the long-term potential of India and remain invested in the same,” Shankar added.
On the other hand, Narendra Solanki, head-equity research (fundamental), Anand Rathi Shares & Stock Brokers added that investors should continue to hold growth stocks and let volatility pass. Markets would be keen to know how the Ukraine crisis evolves and what kind of countermeasures are announced by the West.
“Post that one could expect markets to stabilise. Investors could add stocks in a staggered manner once the market stabilises and as a strategy should focus on domestic-oriented businesses for now,” Solanki added.