Shares in interest-rate-sensitive sectors were under heavy pressure on Monday, with financial stocks including banks, non-bank financial companies (NBFCs), housing finance companies (HFCs), auto stocks and real estate down 6% on the National Stock Exchange. (NSE) in intraday trading on fears of interest cycle reversal due to rising inflation.
The Nifty Auto, Nifty Realty, Nifty Bank, Nifty Private Bank, Nifty PSU Bank and Nifty Financial Services indices were down around 4-5% on the NSE. By comparison, the Nifty50 index was down 2.75% at 9:38 a.m. A total of 18 stocks from these indices hit their respective 52-week lows.
Ashok Leyland, Maruti Suzuki India, Eicher Motors and Mahindra & Mahindra (M&M) of automobiles; Prestige Estates, Sobha and Macrotech Real Estate Developers; Bajaj Finance, ICICI Bank, Mahindra & Mahindra Financial Services and Shriram Transport Finance fell 5-6%.
The Russian-Ukrainian conflict has led to global risk aversion, with equity markets experiencing intermittent periods of correction and high volatility. Uncertainty about the duration and extent of the current conflict could keep the market nervous and dependent on the flow of information.
Rising crude oil prices, if sustained for a high duration, may lead to higher inflation, current account deficit, bond yields and interest rates in India and thus have an impact on the macroeconomic stability.
From India’s perspective, a sharp spike in crude oil prices (Brent crossed the USD 100/barrel mark before falling back) poses major risks on the external balance front and can play the trouble- parties with the assumptions made in the Union Budget for FY23, Motilal Oswal Financial Services said in a recent report. .
If the Russian-Ukrainian conflict drags on and leads to high energy prices for longer, that could impact earnings estimates. However, nearly two-thirds of Nifty’s revenue is isolated/benefits from high energy prices (IT, BFSI, Metals, Oil & Gas), while one-third is negatively affected (Consumer, Auto, Cement, Pharma and Telecom), the brokerage firm said.
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