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Sensex And Nifty Rebound, Market Experts Advise Against Panic Amid Heightened Volatility

Market experts optimistic about recovery and indentify opportunities in the domestic equities.

<div class="paragraphs"><p>A bull statue stands outside a stock exchange. (Photographer: Jasper Juinen/Bloomberg)</p></div>
A bull statue stands outside a stock exchange. (Photographer: Jasper Juinen/Bloomberg)

While the Russian invasion of Ukraine will cause short-term volatility, market participants said investors need to equally watch for some of the domestic factors, including state elections and the upcoming initial offering of Life Insurance Corp. But they advised against panic.

India's stock benchmarks on Friday recovered half of their losses from the day earlier when Russian President Vladimir Putin launched a military operation across Ukraine, sending global equities tumbling.

The S&P BSE Sensex and NSE Nifty 50 rose nearly 2.5% each on Friday, the biggest gain in eight sessions, to close at 55,858.5 and 16,658.4, respectively. Yet, they logged the worst week in three months, largely because of a 5% decline on Thursday.

The rebound underscores heightened volatility, amplifying existing concerns over global rate tightening and oil prices.

"Volatility will continue in March too, but not [just] on account of Russia and Ukraine," Vaibhav Sanghavi, co-chief executive officer at Avendus Capital Public Markets Alternate Strategies, told BloombergQuint’s Niraj Shah in an interview. "Uttar Pradesh election results, LIC IPO and the mid-March Fed meeting—all three events may have an impact on the markets via liquidity or valuations. After that, we may see stabilisation."

Sensex And Nifty Rebound, Market Experts Advise Against Panic Amid Heightened Volatility

On Friday, the broader indices outperformed their larger peers with both the S&P BSE MidCap and S&P BSE SmallCap rising more than 4%. All the 19 sectoral indices compiled by BSE Ltd. advanced with S&P BSE Metal rising nearly 6%.

The market breadth was skewed in favour of the bulls. About 2,638 stocks advanced, 732 declined and 94 remained unchanged.

Still, according to market expert Mehraboon Irani, the near-term worry for Indian markets remains the Russia-Ukraine crisis.

Irani, too, cited the U.S. Federal Reserve's rate hike as the second biggest concern, followed by the LIC IPO that will pull out some money, and state elections could also add to the uncertainty.

"We have been seeing the impact due to the Russia-Ukraine crisis over the past week," Irani said on Thursday. "The Indian markets could possibly fall almost 10% from the current level."

Sanghavi said Avendus was not deploying more chase during such uncertainty. “Volatility is at 30-35%. If that goes down to 20%, we can have reasonable confidence of getting back into the markets.”

Rahul Bhutoria, director at Valtrust Capital, underscored the need for asset allocation. "We always recommend keeping at least 20% cash in the portfolio and to have diversification across asset classes that are less correlated with each other."

He, however, said that a "substantial impact on markets and portfolios has already taken place and this is not at all a time to sell in panic". If risk appetite permits, he said, investors could dip into the cash reserves and invest in equity as part of tactical asset allocation.

Market participants have advised against selling panic.

While risks of oil, inflation and the Ukraine situation are immediate constraints, reversal of fortunes for markets could also be "drastic, just as the correction has been", Mihir Vora, director and chief investment officer at Max Life Insurance Co., had told BloombergQuint after Thursday's slide.

Deven Choksey, managing director at KRChoksey Holding, sees the possibility of the markets stabilising in three to four days after the U.S. and its European allies slapped sanctions on Russia.

"God forbid, if war happens, it could be a trigger point for FIIs to come back and buy in Indian equities as valuations become attractive," he had said on Thursday. "In either situation, do not panic."