Russia-Ukraine crisis: Indian stock markets witnessed a knee-jerk reaction on Thursday after Russian President Vladimir Putin announced a military operation in Ukraine, claiming that the action was intended to protect civilians.

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The Nifty50 was hit too as the index was trading below its crucial support at 17,000 and the crucial long-term moving average of 200-DMA and 200-Days EMA placed at 16887, and 16878 respectively.

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Global equity markets continue to trade in the red amid reports of conflict between Russia and Ukraine. The risk-off buying pushed MCX Gold above Rs 51000 per 10 gm, and international crude oil prices breached $100 mark for the first time since 2014.

India VIX index - which measures expected volatility in the equity market, surpassed 30 mark in intraday trade on Thursday.

Tracking the weakness, not just in the Nifty50 but about 60 per cent of the companies in the index are trading below the long-term moving average of 200-EMA, data from Trendlyne showed.

Stocks that are trading below the 200-EMA, as well as 200-EMA, include names like RIL, TCS, HDFC Bank, HUL, Wipro, Kotak Mahindra Bank, JSW Steel, Tata Steel, etc. among others, data showed.

 The long-term moving average of 200-DMA is widely tracked by technical experts in deciding the broader trend in the market.

The major moving average also acts as major support and resistance in any trend. A move above or below 200-DMA indicates a change in the trend, suggest experts.

“After several attempts, the market collapsed below the levels of 200 days DMA. Based on our experience, Nifty will spend time around 200 days MA and later it will rebound or fall,” Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said.

“As the market is approaching the same after a long period of time, we are expecting the market to correct slightly more below the same and bounce back. We need to see how these events unfold. Minimize fundamentally weak stocks and include growth-oriented stocks in the portfolio,” he said.

What should investors do?

A break below 200-DMA signals caution for market participants and investors should cut leverage bets, suggest experts.

Most companies in the Nifty50 index are bluechip and a break below 200-DMA or 200-EMA does suggest a break in the uptrend but investors should hold as the market action is fuelled by external events.

Long-term investors should use the dip to strengthen their position in a quality stock or invest fresh money at current levels as the risk-to-reward ratio remain favourable.

“We need to be cautious in the case of leveraged positions, however, for investment, this would be an opportunity to invest in strong and quality companies with medium to long term outlooks,” suggests Chouhan.

“Those who are already investing can look to strengthen the portfolio by reducing weak stocks and adding strong ones,” he said.

If the majority of Nifty50 stocks slip below their 200-DMA then it is not a good sign but we should wait for confirmation because sometimes we may see a false breakdown.

“If Nifty manages to hold its 200-DMA then some of the stocks like Divi’s Laboratories, HeroMoto Corp, Bajaj Auto, HDFC, Kotak Bank, HDFC Bank, SBI Life, Wipro will provide a good buying opportunity,” Parth Nyati, Founder, Tradingo, said.

“Short-term Traders should stay light amid lots of uncertainties where 16800 should be their trading stop loss for long positions,” he said.

Nyati further added that the long term should stay invested and look for buying opportunities in this correction because we are in a structural bull run where the bull market will remain intact even Nifty further corrects 10-20% from here.

Why is 200-DMA important – what does the history tell us

The last time it went under 200-DMA was back in February 2020, the Nifty finally took support near 7500 before bouncing back to hit fresh record highs.

Investors with a long-term time horizon can look at buying the dip as equity markets does not like uncertainty and bounce back when things stabalise.

“The 2020 event was a black swan, which magnified the fall that ensued the break of 200DMA. Geopolitical tensions have a history of having only a brief impact on financial markets and the recovery is often swift,” Anand James, Chief Market Strategist at Geojit Financial Services, said.

“Traders have taken solace in this, which is the reason why Nifty is just over 5% below January peak. However, there is no reason to get ahead of oneselves, as there are many other pressure points that have all taken the back seat as the prospects of an impending war, hogs the limelight,” he said.

Jain further added that come March, they will all resurface. However, the prospects of such a sustained and sharp fall is close to nil.

Whenever there is an uncertain event that is difficult to predict or the outcome of the event is random then in that case the market turns risk-averse.

“The market is facing a series of uncertain events since October 2021 such as the decision on the rollback of stimulus from the US, interest rate movement from the Fed, UP elections, Q3 and Q4 quarter numbers and the newly added geopolitical tension between Russia and Ukraine,” said Chouhan of Kotak Securities Ltd.

“Until the market is not getting a specific or certain outcome, we think the market to remain volatile and may even trade below the support of the 200 days DMA,” he added.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)