Stock markets across the globe are watching with rapt attention the developments surrounding the US-backed framework to end the Russia–Ukraine war, as a potential resolution to the biggest European invasion since World War II could lift sentiment and trigger a fresh upside in riskier asset classes.
The Russia-Ukraine war has stretched for almost four years. It started on February 24, 2022, when Russia launched a full-scale invasion of Ukraine.
Positive signs are emerging, indicating the war could be near its end. US President Donald Trump has announced parallel missions to Moscow and Kyiv to push for the proposed US-backed peace plan.
According to news agency AP, Trump is sending envoy Steve Witkoff to meet with Russian President Vladimir Putin and Army Secretary Dan Driscoll to meet with Ukrainian officials.
How may the Russia-Ukraine peace deal impact Indian stock market sentiment?
The Indian stock market, which has notable domestic tailwinds, could see a fresh upside as it may favour risk-on sentiment markets globally, as the end of the war will mean potential normalisation of global supply chains, especially across energy, agricultural commodities, metals, and other critical materials that were disrupted due to the war.
At a time when an India-US trade deal looks near, and the prospects of a rate cut by the US Federal Reserve in December are growing stronger, a Russia-Ukraine peace deal could be an additional significant tailwind.
“The progress toward a negotiated end to the war is already helping unwind the geopolitical risk premium and is likely to significantly favour risk-on sentiment in global financial markets,” said Sugandha Sachdeva, Founder of SS WealthStreet.
“Adding to the supportive environment, global cues have turned constructive amid renewed expectations of a US Fed rate cut in December, triggered by dovish Fed commentary and weaker US macro data. This has pushed the probability of a December rate cut to nearly 80%, softening the dollar and improving global liquidity conditions,” said Sachdeva.
Sachdeva pointed out that with the dollar easing and geopolitical tensions moderating, the overall backdrop looks increasingly supportive for Indian equities.
On the sectoral front, easing geopolitical tensions and the possibility of lower crude oil prices could have a divergent impact. Sector-wise, easing tensions and softer crude prices may temper sentiment in defence stocks and upstream oil exploration companies. However, lower crude is a strong positive for OMCs, paints, tyres, aviation, and other cost-sensitive sectors, said Sachdeva.
Seema Srivastava, Senior Research Analyst at SMC Global Securities, also believes that the reported Ukraine peace deal is expected to boost Indian equities with a risk-on bias, driven by sectors that benefit from lower crude oil prices and improved global sentiment.
Srivastava believes energy-intensive segments, such as paints (Asian Paints, Berger Paints), adhesives (Pidilite), tyres (MRF, Apollo Tyres), logistics, airlines (IndiGo), and broader consumption (HUL, ITC, DMart), may see increased buying interest due to potential margin relief and softer inflation.
(This is a developing story. Please check back for fresh updates.)
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