Surging Crude Oil Prices Takes Equity Benchmarks Into Red Zone
Surging crude oil prices on Monday led equity benchmark indices into the red zone, ending their previous week's rally. Investor sentiment was also soured after global markets slipped as the Russia-Ukraine conflict dragged on with little progress in peace talks.
The 30-share pack Sensex declined 571.44 points or 0.99 per cent to close at 57,292.49. Its broader peer NSE Nifty slumped 169.45 points or 0.98 per cent to 17,117.60.
“Profit-booking at higher level was witnessed today as international crude prices spiked to $108. Also, no significant progress on Russia–Ukraine peace raised fears of further sanctions and prolonged disruption to oil and metals supply. We can primarily blame the sluggishness at Dalal Street to WTI Oil prices which again spiked to $108 a barrel,” said Prashanth Tapse, Vice President (Research), Mehta Equities.
Bank, Auto and Financial Services sectors were among the worst performers, while Metal stocks shone. Sun Pharma and HDFC Bank were among the top gainers, while Power Grid and Asian Paints, were among the top losers.
“After a strong uptrend start, the benchmark indices witnessed profit booking as traders started booking profit as benchmark indices approached key resistance level. Profit booking was seen in FMCG and infra stocks whereas despite weak market conditions buying interest continued in metal stocks,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities.
Crude oil tops $110
The surge in oil prices on Monday was due to multiple factors. A Reuters report said OPEC (Organisation of the Petroleum Exporting Countries) and its allies missed the production target by more than 1 million barrels a day (bpd) in February under their pact to increase production by 400,000 bpd each month. Also, Yemen’s Houthi rebels attacked some sites in Saudi Arabia on late Saturday and Sunday which added more fuel to the market.
In Mumbai trading, the Nifty Bank Index fell 1.13 per cent after two consecutive sessions of gains, while the Nifty Auto Index lost 1.21 per cent.
“We are of the view that, 50-days SMA or 17250 on the Nifty would act as an immediate hurdle for the bulls. Below which the correction wave is likely to continue till 17000-16975. Fresh uptrend possible only after 17250 breakout. Above which the chances of hitting 17350-17400 would turn bright. Contra traders can take a long bet near 16975 with 16950 support stop loss,” said Chouhan.
The Nifty Pharma Index gained as much as 1.50 per cent earlier in the day after 19 Indian generic drugmakers, including Sun Pharma and Cipla, received a license to make cheap versions of Pfizer’s highly effective COVID-19 antiviral pill.
(With inputs from Reuters)
