The Indian markets opened with a fall of more than 1 percent on Wednesday, March 2 and due to the worsening situation regarding the Ukraine Crisis and the rise in crude, the decline has increased by 2.30 pm.
Global markets are also showing the effect of Russia-Ukraine war, which has now entered the 7th day. Oil prices have reached the level of $110 a barrel due to aggressive stance of Russia and continuous tightening of sanctions on Moscow by Western countries.
The 30-share BSE Sensex in India opened down 618 points and is currently trading at 55,122 with a weakness of 1,125 points (at 2.30 pm). At the same time, Nifty also opened with a fall of 200 points and currently remains at 16,499 with a fall of 296 points.
Here we are telling about such factors, which are putting pressure on the Indian stock market:
1. Russia-Ukraine War
Russia-Ukraine war: The main reason for the decline in global markets is Russia’s attack on Ukraine. Russia’s economic crisis has been triggered by sanctions from Western countries, making the situation appear to be heading towards Europe’s worst confrontation since World War II. Russia’s separation from SWIFT Financial Networks limits its ability to use its $630 billion financial reserves. Many companies have started withdrawing investments.
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Russian forces have penetrated deep into Ukraine. In the opinion of experts, volatility index will remain high in the near future due to uncertainty surrounding the war.
2. Crude prices caught fire
Crude: Fears of disruption in energy supply have taken a toll on investor sentiment. Brent crude has surged above $110 a barrel despite the US and its allies agreeing to release $60 million from their strategic reserves to support demand.
A rise in crude prices will add to the already high inflation. India imports about 80 per cent of its oil requirements. This will further worsen the current out deficit and fiscal deficit situation with inflation rising here. This will also put pressure on the margins of Indian companies.
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3. Bond Yields and Rate Hikes
US 10-year bonds fell 15 bps to 1.75 percent. While Germany’s 10-year yield dropped by 21 basis points to 0.07 percent, Britain’s 10-year yield fell 28 basis points to 1.13 percent.
“A few sessions ago, the market was expecting 50 per cent hike in Fed’s March policy by 50 bps, now it is less than 100 per cent expecting a 25 bps rate hike,” IFA Global Research said in a note.
4. Weak GDP
India’s third quarter GDP growth stood at 5.4 per cent year-on-year, much lower than expected at 5.9 per cent. This was mainly due to reduction in government consumption and gross fixed capital formation.
With fall in US Treasury yields and rise in crude prices, the Indian bond market will also react to Finance Minister Nirmala Sitharaman’s remarks in which she expressed the possibility of delaying LIC IPO due to poor market conditions.
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5. Weak Global Indications
Weak global cues: All major US indices were falling on 1 March. The S&P 500 was down 1.5 percent. On the other hand, the Nasdaq 100 lost 1.6 percent, the Dow Jones Industrial Average 1.8 percent and the MSCI World Index fell 1.4 percent.
Talking about the European markets, the German DAX recorded a strong decline of 3.85 percent and the FTSE 1.72 percent.
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