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Markets were badly hit by the Soviet transgression into Ukraine last week. Though they recovered 50 per cent of what they lost because of the transgression, they still closed with substantially higher losses. BSESENSEX lost 1,974.45 points or 3.41 per cent to close at 55,858.52 points while NIFTY lost 617.90 points or 3.58 per cent to close at 16,658.40 points. The broader markets saw BSE100, BSE200 and BSE500 lose 3.51 per cent, 3.45 per cent and 3.57 per cent respectively. BSEMIDCAP lost 2.56 per cent while BSESMALLCAP lost 4.68 per cent.The Indian Rupee lost 63 paisa or 0.84 per cent to close at Rs 75.29 to the US Dollar. Dow Jones lost a mere 20.43 points or 0.06 per cent to close at 34,058.75 points.Coming to the markets, we lost a massive 2,703 points on the BSESENSEX on Thursday when hostilities broke out. Similar loss on NIFTY was 816 points. The next day on Friday approximately half was regained with BSESENSEX gaining 1,328 points and NIFTY 410 points. Significantly, the loss for the week is even more than that and comes from the weakness on the first three days of the week.During the sharp fall on Thursday, markets broke the low made on December 20. This low was 55,132.68 and 16,410 points. The new lows made on Thursday, the 24th of February were 54,383.20 points and 16,203.25 points. The last low lasted for a little over two months and was followed by a vicious uptrend which saw BSESENSEX gain over 6,000 points in just under a month. Whether some thing like this will happen yet again is difficult to predict and looks unlikely as of now.Events are completely different this time around. While the cause of the fall was due to hostilities and the recovery could be more of a knee jerk reaction, movement hereafter will be driven by events. While currently no sanctions have been imposed on crude oil and gas, a large number of restrictions have been put on Russia and its central banks and largest banks. This will affect movement of goods globally. While India would be able to continue to trade under the bilateral trade regime which uses the Indian Rupee with Russia, it will have repercussions sooner than later.Assuming the issue does not get resolved in the next few days, the situation will harden on both sides. Ukraine exports sunflower oil, inorganic chemicals, iron and steel and plastics to India. To the world it exports corn, wheat, seed oil, iron ore and semi-finished iron. Russia would ensure that movement of goods from Ukraine's ports are affected. The crux of the dispute is to ensure that Ukraine does not become a member of NATO, and thus NATO does not have access to Russian borders.February futures were badly hit as the skirmish between Russia and Ukraine happened on Thursday which was expiry day. February futures lost 862.20 points or 5.04 per cent to close at 16,247.95 points. NIFTY lost 816 points on NIFTY on Thursday, which effectively means that the series was down by a mere 46 points prior to expiry day.The government has allowed 20 per cent FDI by automatic route in the upcoming LIC IPO. While market rumours talk about the issue likely to get delayed, the FM is on record as stating that the issue would happen and get listed in the current financial year. Suffice to say that we have to go by what the official version is until there is better clarity.There is no news on primary issues tapping the capital markets in the coming week. One does hear of a couple of issues likely to do so in the second week of March, but as of date there is no confirmed news whether it be by way of ROC filing or issue advertisements.Dow futures were up sharply at the time of writing this article along with Singapore NIFTY futures. While this indicates a very strong possibility of a gap-up opening on Monday, it must be borne in mind that the skirmish has just begun. There is no immediate resolution in sight currently. Ukraine is asking for ammunition to defend itself and is unlikely to allow a takeover under any circumstances. While it is not a NATO member, the support required for Ukraine has to come if this skirmish is to be resolved at the earliest. Not being a war expert, let me end it here, cautioning people that markets would need to consolidate before they can get over the setback of this intrusion and unfortunate event.Election results to five states would be available on 10th March when counting begins. The last round of voting is on Monday, the 7th of March. Exit polls would begin on that evening, and if the consensus points to the government of the day faring well in these elections, the markets could see a leg up when they begin to trade on the 8th of March.What should investors do in the markets currently is a key question on everybody's mind. Transgression has happened and is unlikely to end in a day or two. The longer it lasts, the greater would be the ramifications for the two parties involved and the world at large. Global tension, dislocation of goods and services, inflationary pressure on commodities and cost of the war and then the cost of rebuilding will cripple the fragile global economy still struggling from recovering from after effects of Covid-19.The time is to play the markets by buying on sharp dips and selling on rallies as markets will remain extremely choppy. Choose stocks only from large caps as they will be safer and liquid in these difficult times. The fall in Smallcap stocks is much more pronounced and is slightly less in midcap stocks. While FII's have been big sellers in the cash market they have been net buyers in Futures and options, indicating that they are bullish on the Indian markets. Trade cautiously.(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal)Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor

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