Effects of the Russian-Ukraine Trouble upon Indian Markets

Russia’s antipathy to Ukraine has rattled the already shaky stock market, regardless of you label something an emendation or a tragic occurrence.

The impending danger of an unaddressed problem has become a fact

So over generations, humanity has seen the worst effects of a global economic meltdown, such as the rise in commodity prices, which causes inflation.

The stock market has been in wild slide ever since beginning of the year. Russia’s increasing disagreements with Ukraine are exacerbating the market’s troubles. Following the advent of geopolitical disputes and war-like scenarios among the two countries, the international financial market has recently witnessed bloodbath. Such inflictions have had a significant influence on the Ukrainian economy and the Russian currency.

• Following losing nearly 3% versus the dollar, the Euro fell under $1.10 for the very first time until March 2020.
• Due to the breakdown of sea and air deliveries of recipient countries by Russia, raw material costs have jumped to multi-year peaks, ranging from grain to minerals.
• Brent crude prices went up by yet another 21%, hitting their highest possible level since 2013.
• Aluminium and nickel prices are at all-time highs. Furthermore, gold prices have reached a 13-month high.

As a result, the leading Indian stock market indexes have also suffered. Both the SENSEX and the NIFTY had dropped by 1% recently, leaving the stock market in negative territory. The escalating Ukraine crisis forced up oil costs and raised inflation concerns. For the fourth week in a succession, overall indices were expected to fall.

But, When is a dispute between different countries at war affecting India’s stock market? Is the impact long-lasting or temporary?

Why do Geopolitical Tensions Affect the Global Market?

• The globe is a global society, strewn across seven continents.

Large-scale geopolitical tensions in important locations might impair distribution networks and cross-border commerce, leading to stockpiling and an increase in commodity prices. It could have an effect on inflation rates and influence the value of national currencies. Moreover, the existence of these conflicts has the potential to alter global investors’ tolerance for risk, resulting in asset selling pressure. The services, commerce, and investments of international markets are all interwoven. As a result, a significant geopolitical event in one location will have a worldwide effect.

• Funds are being diverted from developed to developing markets.

Macroeconomic variables have an impact on financial, business, and currencies all over the globe. Furthermore, such variables affect the movement of cash from established to developing markets. Supply chain operations, enables entrepreneurs, and the transportation of goods can all be disrupted by geopolitical crises.

What Effect Will the Ukraine-Russia Conflict Have on the Indian Market?

As the prevailing media stream intentionally misleads market turmoil, geopolitical emergencies like the Ukraine-Russia war produce interim stock market reaction. Oil prices would go up in comparison to current levels due to the ongoing Russia-Ukraine tensions. By the third and fourth quarters of 2022, inflation was predicted to be on the fall, although rising crude oil prices may lead the projection to be delayed. Variability is present throughout all major asset classes, particularly stock and debt, as a result of current macroeconomic events. Before we can decide on a market direction, we first must cope with the volatility, which will only be present for a limited period of time.

• The cost of imports in India could rise.

Russia is responsible for less than 1% of India’s total crude oil imports. This is owing to India’s refineries’ inability to comprehend Russia’s heavy oil. As a result, India would feel the burden of rising crude prices implicitly, as well as its import bill would skyrocket, putting downward pressure on the country’s already high CPI inflation. Moreover, rising prices will result in higher food and commodity prices.Brent crude prices have recently topped $104 per barrel on international markets, setting a new record since 2014. Prices will climb much further if Western countries impose sanctions on Russia. The crude oil market will be severely impacted when Russia drops out of the top three oil producers, supplying only 12 to 13% of world demand.

• The stock market is the subject of discussion.

On February 24, the premium blue-chip NSE NIFTY 50 index down 2.43 percent to 16,649.30 points, while the S&P BSE Sensex fell 2.50 percent to 55,800 points. For the seventh session in a straight, both indices were expected to decrease. From March 2020, the Indian Stock Market has been on a winless skid.

• Crude oil and edible oil are also affected.

Russia is the world’s third-largest crude oil supplier. After Russia’s invasion of Ukraine, crude oil prices soared to a seven-year high of $110 per barrel. If oil prices soar over $100 per barrel, painting makers, oil producing nations, and fertilizer producers will all struggle. Additionally, when the price of crude oil rises on a global scale, so will the price of gasoline. Inflation will be exacerbated as a result of this.

What’s Next?

The stock market is expected to incur huge losses if Ukraine-Russia war intensifies, since oil prices are anticipated to stay rising. One worrying sign is really the impact of rising crude oil prices on the Indian economy, that comes at a time where inflation is approaching 6%, considerably above the Reserve Bank of India’s upper limit. The NIFTY volatility index has reached new highs not seen since June 2020.

Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.