Three things that pulled Nifty 500 pts up in 2 days; Use current valuations to add quality bluechip stocks

Indian equity markets have rebounded in the last two days after Ukraine President Volodymyr Zelensky stated that Ukraine will no longer push to be a part of NATO. Cool off in crude oil prices has also led to Nifty recovering nearly 500 points, reclaiming 16,700 during intraday deals. At close, Sensex ended 817.06 points or 1.50% higher at 55,464.39, and the Nifty settled 249.50 points or 1.53% up at 16,594.90. Additionally, as the state election results in Uttar Pradesh, Punjab, Goa, Mizoram, and Uttarakhand are on expected lines, they may provide positive momentum to the markets. Analysts expect that if the Ukraine-Russia tensions continue to simmer down, this could be the start of reversal for Indian benchmarks. Investors can focus on buying select good quality stocks from banking, finance, autos, and consumption pack.

What pulled markets up?

Ukraine backing out of being a NATO member

“Markets are trading with positivity and the sentiments all over the globe have been positive as the president of Ukraine has said that they no longer will push for being the member of NATO. This has given some hope for the investors that the geopolitical tensions will decrease, and the situation will get better, and this has been a key reason for positivity in the markets. With the geopolitical situation decreasing, we expect the crude prices to decrease, and it will also cool down the inflation which has been a very key factor in the market recently as the inflation has been constantly increasing,” said Likhita Chepa, Senior Research Analyst at CapitalVia Global Research.

Crude oil price cool-off

“There are multiple reasons for markets rising apart from Ukraine saying it no longer wants to be a part of NATO. The more tangible reasons are that of crude cooling off nearly 15% from its high point. Apart from this, the reason for the markets bouncing off is the relief that it sees from these developments and also the extent to which it was oversold with heavy shorts in the system which are now fueling the massive short squeeze,” said Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder, Gemstone Equity Research & Advisory Services.

Positive global cues, state election results

“In addition to the tailwinds from global markets due to perceived containment of risk from Russia – Ukraine conflict, another short-term trigger for the market today is the assembly election results announcement wherein the biggest (no of Lok Sabha seat wise) state of UP is seeing a return of the incumbent government. Markets like the stability of policy, and thus, there is a belief that if the incumbent government is placed well in UP, there is a high probability of them doing well in the Lok Sabha elections in 2024 as well. Another factor helping Sensex and Nifty is linked to the Russia – Ukraine conflict, which is the fall in crude oil price yesterday,” said Nishit Master, Portfolio Manager, Axis Securities.

Invest in these bluechips

“We can expect this to be the beginning of the reversal if the geopolitical tension continues to decrease. There has been a significant correction in a lot of fundamentally strong stocks such as Asian Paint, HUL, HDFC Bank and TCS which could provide investors with a good opportunity to invest for long term and hence investors should see this as an opportunity to invest in the market for long term,” said Likhita Chepa, Senior Research Analyst at CapitalVia Global Research.

Wait for a day or so before jumping in

Investors should wait for a day or so before jumping in as some minor profit taking or some ranged consolidation cannot be ruled out. It would be prudent to take profits home in commodities and metals and focus on buying select good quality stocks from banking and finance, autos, and consumption pack, said Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst and founder, Gemstone Equity Research & Advisory Services.

Banks, Metal stocks good bet

“We expect markets to remain volatile over the next few weeks, with movements on both sides accentuated. We thus believe that one should invest in tranches. If an investor has a long-term perspective, then at current levels, the risk-return framework is favorable for increasing fresh investments in equity. Investors should start/increase allocation to equities by investing in tranches so that even if there is a fall, they can take advantage of the fall in the next tranche of investment,” said Nishit Master, Portfolio Manager, Axis Securities.

“We remain positive on some metal names despite the fall in metal prices in the last two days. Even at a 10-15% discount to current prices of metals, they offer good return potential. We also like opening up trades after most of the Covid related restrictions are getting lifted across India, including Hotels, QSRs, Multiplexes, etc. Agri-related plays, where Government subsidy is not a major part of revenues, also look good. Large Private Sector banks and the biggest PSU Bank also offer a very good risk-return profile and can be looked at aggressively.” he added.