A Mixed Bag Of Events

The Indian markets faced a volatile fortnight, severely hit by Russia-Ukraine tensions and US’ allegations against Gautam Adani but rebounded on hopes of a decisive political mandate in Maharashtra elections 

The Indian markets experienced significant volatility over the past fortnight, marked by sharp declines during most trading sessions. Escalating tensions in the Russia-Ukraine conflict and allegations against Gautam Adani significantly weighed on market sentiment, intensifying selling pressures. In a strong signal to the US and Western powers, Russian President Vladimir Putin approved changes to Russia’s nuclear doctrine, expanding the conditions under which Moscow might deploy nuclear weapons amidst the ongoing conflict.

Meanwhile, Indian billionaire Gautam Adani faced serious allegations from US prosecutors, accusing him of involvement in a USD 265 million bribery scheme to influence Indian officials over power supply contracts linked to energy projects in India. Foreign institutional investors (FIIs) extended their selling streak, offloading equities worth `21,000 crore over the fortnight. Despite these negative market developments, the fortnight period concluded on a strong note, with benchmarks staging a robust rebound. This recovery was fuelled by optimism over a decisive political mandate in the Maharashtra elections, as indicated by the majority of exit polls.

The frontline indices soared around 2.5 per cent in a single session, fuelled by optimism that the central government will retain power in the state, fostering a stable central-state dynamic conducive to business growth. Despite the late optimism, BSE Sensex and Nifty 50 closed the fortnight with declines of 0.46 per cent and 1 per cent, respectively. Broader indices also remained under pressure despite a partial recovery, with the BSE Mid-Cap index dropping 2.28 per cent and the BSE Small-Cap index plunging 4.19 per cent.

On the sectoral front, the performance was mixed. The real estate and information technology sectors saw notable buying interest, while the power and oil and gas sectors remained the worst performers, largely due to substantial declines in Adani Group’s power and energy stocks, along with weaker sectoral performances. FIIs notably reduced their sizeable stakes in the oil and gas sector, which experienced the steepest decline in earnings for the September quarter, driven by volatility in crude oil prices and shrinking gross refining margins.

Selling pressure is likely to persist with Donald Trump’s return as US president potentially driving crude prices lower. In other developments, India’s forex reserves experienced their sharpest weekly decline, hitting a four-month low. The central bank was forced to dip into its reserves to cushion the rupee amid the relentless surge of the dollar following the US presidential elections. On the other hand, the Reserve Bank of India’s gold purchases are trying to contribute to the strengthening of India’s foreign exchange reserves.