Topic 1: IMPACT OF RUSSIA’S INVASION OF UKRAINE

Russia’s invasion of Ukraine happened just when markets were getting ready for a series of Fed rate hikes, and encouraging signs were emerging that the world was finally moving to an endemic state of Covid.

Before this invasion, 2022 had already witnessed a selloff in global equities due to high inflation numbers and central banks worldwide pledged to end the easy liquidity situation. The Fed dot plot indicated around seven rate raises of a quarter-point each this year, followed by a few more rate hikes in 2023.

We were cautious on the markets even before the Russia-Ukraine crisis unfolded. With several sanctions imposed on Russia, we expect further disruption in the global supply chains, and this event will make inflation worse. Even the euphoria in the consumer confidence that was finally emerging from Covid after two long years may be curtailed by rising geopolitical tensions.

India has played a balanced approach by not explicitly siding with any of the major powers involved nor speaking up against them. However, the

surge in Oil & Gas prices due to global supply disruption poses a problem for the Indian economy. Higher oil prices could cause a rise in retail inflation and impact households’ discretionary spending. Also, it may widen India’s current account deficit due to higher oil import bills. India’s massive foreign exchange reserves shall help tackle any volatility in the currency.

From an equity markets perspective, the ongoing conflict between Russia and Ukraine could cause short-term volatility. The uncertainty around the Uttar Pradesh state election results and the Fed’s meeting in mid-March could impact the markets.

Given these headwinds, we would be cautious on the market and recommend spreading your investments over the next 3-6 months. Most stocks in the mid and smallcap segment have taken some beating due to the recent volatility and are now available at cheaper valuations. Systematically adding allocations to the midcap and smallcap segments could benefit over 3-5 years.

Top | Back

The information contained herein (the “Information”) may not be reproduced or disseminated in whole or in part without prior written permission from the Company. The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared based on publicly available information, internally developed data and other sources believed to be reliable. The directors, employees, affiliates or representatives (“Entities & their affiliates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy, reliability and is not responsible for any errors or omissions or for the results obtained from the use of such information. Readers are advised to rely on their own analysis, interpretations & investigations. Certain statements made in this presentation may not be based on historical information or facts and may be forward looking statements including those relating to general business plans and strategy, future financial condition and growth prospects, and future developments in industries and competitive and regulatory environments. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, they do involve several assumptions, risks, and uncertainties. Readers are also advised to seek independent professional advice to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this document shall not be liable in any way for direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of the lost profits arising from the information contained in this material. Readers alone shall be fully responsible for any decision taken based on this document.
Copyright © 2022 Fintso