Indian markets close sharply higher amid easing geopolitical tensions

Log biggest gain in more than a year on signs of potential Russia-Ukraine 'climbdown'

The benchmark indices rebounded on Tuesday, recouping all of previous day’s losses, on reports of de-escalation of tensions between Russia and Ukraine.

The news came as much-needed relief to equity markets which were rattled after a massive mobilisation of the Russian army around Ukrainian borders led to fears of an invasion and a standoff between the US and Russia.

The benchmark Sensex ended the session at 58,142, a gain of 1,736 points or 3.08 per cent. The Nifty, on the other hand, ended the session at 17,355, a gain of 512 points or 3.04 per cent. The gain was the best since February 1, 2021, when markets had rallied 5 per cent following the Union Budget.

News reports suggested that Russia's Western and Southern military districts on Tuesday will return to their permanent bases after completing their drills. During the last few weeks, Russia is estimated to have mobilised around 100,000 troops near Ukraine, and another 30,000 have been taking part in exercises in neighbouring Belarus.

Illustration: Binay Sinha

"Yesterday's fall was because of the escalation of geopolitical tensions today it is because of some withdrawal of troops. That's the only thing one can attribute it to. Maybe there was a bit of short covering. The only thing that will impact the market now is the interest rate, whose impact is not going away anytime soon. Even the Russia Ukraine tensions haven't gone away. All the volatility inducing factors are very much present," said Andrew Holland, CEO, Avendus Capital Alternate Strategies.

The easing of geopolitical tension led to a fall in crude oil prices. The Brent crude was trading at $94.4 per barrel. On Monday, the prices had climbed to $97.6, the highest since October 2014.

Germany's Chancellor Olaf Scholz meets Russia's Vladimir Putin to find a diplomatic solution to the crisis. Earlier, the US officials had warned of an imminent Russian invasion of Ukraine though Russia has firmly denied any such move from its part. The Ukraine crisis has added to the market concerns on high inflation and central banks' withdrawal of the easy monetary policy.

The Russian President has asked the US and its allies for some assurances, including a ban on further expansion of the North Atlantic Treaty Organization. Though the west has rejected his demands, they have agreed to talk on other security issues.

"The market wants to believe that everything is over. That's why there was such a big rally today. We have to brace for more volatility. We are not sure where Ukraninan tensions are going. The west will have to make some concessions. Otherwise, it is unlikely that Russia will quietly withdraw its troops.,' said UR Bhat, Co-founder, Alphaniti Fintech.

In the absence of any significant domestic event, updates related to Russia-Ukraine tension and its impact on global markets is likely to be on investor radar for a while.

The market breadth was strong, with 2,056 stocks advancing and 1,316 declining. Around 418 stocks were locked on the lower circuit against 272, which hit the upper circuit.

All the Sensex constituents ended the session with gains. Bajaj Finance was the best performing Sensex stock and ended the session at 5.1 per cent, followed by SBI, which gained 4.5 per cent. Auto and Banking stocks rose the most, and their indices gained 3.8 and 3.5 per cent, respectively.