It#39;s commodity stocks over consumption play if Ukraine-Russia tensions continue, says Dimensions Consulting#39;s Ajay Srivastava

Market Outlook

Global equities have come under pressure in recent weeks on rising tensions between Ukraine and Russia.

Nudge investments towards commodity stocks instead of consumption stocks if tensions between Russia and Ukraine continue, Ajay Srivastava, chief executive officer at Dimensions Consulting told CNBC-TV18 in an interview on February 22.

Srivastava believes that basic materials do well in times of geopolitical uncertainty as witnessed in the sharp spike in global crude oil prices since the beginning of 2022. “You got to be on the commodity side and not on the consumption side (of the trade),” Srivastava said.

Live Updates: US to announce sanctions against Russia today in coordination with allies

Global equities have come under pressure in recent weeks on rising tensions between Ukraine and Russia and a possibility of a war breaking out in Eastern Europe. Russia on February 21 recognised the independence of separatist regions in Eastern Ukraine in what the EU Commission termed a violation of international law and the Minsk Agreement.

Russia’s move has invited the threat of severe sanctions on the country from both the European Union and the US with reports suggesting that some sanctions may be announced as soon as today.

Experts have warned that such sanctions as delinking the Russian economy from the international dollar system will not only hurt Russia but also a major part of the global financial system, which is a key risk for risk assets.

Srivastava is of the view that global central banks will have to step in again if the consumption side of the global economy starts to hurt because of the Ukraine crisis. Global central banks are on a path to normalisation after unleashing extraordinary measures to cushion the global economy from the impact of the pandemic.

Srivastava also suggested that information technology (IT) stocks remain a good fundamental story even if their valuations are crimped by rising interest rates in the US and Europe. Indian IT stocks have fallen 5-20 percent since the start of the year due to selling pressure from foreign investors and concerns over rich valuations leaving little upside.

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