Benchmark stock market indices showed signs of recovery on Wednesday morning, tentatively snapping a four-day losing streak despite the persistent shadow cast by rising crude oil prices and the ongoing conflict in West Asia. By 9:47 am, however, the early gains had softened, with the S&P BSE Sensex slipping 216.67 points to 74,342.57, while the NSE Nifty50 retreated by 68.50 points to settle at 23,311.05.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, noted that the markets had previously been banking on a swift resolution to the geopolitical crisis and a subsequent dip in oil costs. He suggested that such an outcome now looks increasingly unlikely, which is beginning to weigh heavily on India’s macroeconomic stability. With the Rupee hitting a record low of 95.63 against the dollar, the Chief Economic Adviser has described the situation as a "live Balance of Payments stress test." Such a development clearly indicates an increasing danger of growth slowdown along with rising inflation rates – both of which are not good for equities at this time.
Under such circumstances, when the story of the global “AI trade” continues to dominate the markets, FIIs will most likely continue selling in bulk, as seen in the current derivatives data. Under such conditions of uncertainty, the prudent thing for the investor community to do would be to adopt a conservative approach towards investment. Holding cash would seem like a good idea until the path of crude prices is clear. Investors who want to maintain exposure could consider entering the pharma sector.
Also read: Stock markets tank 2 pc amid rising oil prices
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