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Below is the weekly article on Market By Ms. Yesha Shah, Head of Equity Research, Samco Securities 

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 a same atrocity. 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. 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. 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.

Technical Outlook

Nifty50 index closed on a strongly negative note for the week breaking below the crucial support zone around 16,800 levels. Albeit the sharp rebound seen on Friday, the index failed to recoup all the losses. Also, there has been structural damage to the ongoing major trend due to which this recovery seems less sustainable. The bounce, hence, can be a good exit opportunity for short-term traders. Until Nifty breaks above 17,500 levels, we suggest traders maintain a bearish outlook. Immediate support and resistance are now placed at 16,200 and 16,900 levels.

Expectations for the week

Prevalent geopolitical tensions will continue to take centre stage and will be a primary driver directing market direction and investor mood internationally. If the current state of conflict between Russia and Ukraine continues, markets may sink even further into the red sea. In addition, the domestic economic calendar will have an impact on D-Street, as quarterly GDP results, auto sales figures, and manufacturing PMI readings are all due in the next week. Given the various trigger points and growing uncertainty, investors are recommended to exercise extreme prudence in the short term and avoid any aggressive trades. Nifty50 closed the week at 16,658.40, down by 3.58%.

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