What is your view on stock markets for Tuesday 22nd March and do you see the oil bounce impacting Indian markets?

On Monday, the Nifty was down 169 points and Sensex down 572 points as oil and geopolitical risk combined to spook markets. Russia continues to relentlessly bomb Mariupol and now there is talk of the EU also putting a ban on Russian oil entering Europe. That could have much larger implications for oil turmoil as EU is 55% of Russian demand.

In terms of market internals, the overall breadth of market was negative with the advance decline or A/D ratio at 10:40. However, the fall in markets was accompanied by VIX rising by 9% to 24.62 levels. PSUs and metals continue to do well while FMCG stocks are taking it on their chin. Oil could hold the key to the stock markets on Tuesday.

FPIs net sold equities worth Rs.2,962 crore on Monday even as domestic funds and LIC bought stocks worth Rs.253 crore. The Vanguard buying looks more like an index one-off. In global markets Fed hawkishness hit US markets while Europe was mixed. In early trades on Tuesday, SGX Nifty is trading 20 bps higher but that could be deceptive.

Oil and monetary policy remain the two major headwinds for the markets. Crude has already bounced back from $100/bbl to $115/bbl in just about 3 trading sessions as supply promises to get tighter. If EU sanctions Russia, things could get worse. Jerome Powell’s statement is also likely to work against markets as they were just too hawkish.