Went into a rollback: what will happen to the Moscow Exchange index after falling below 2000

In the near future, it will be decided whether the Moscow Exchange index will continue to fall below 2,000 points or whether the trend will reverse — both options are quite possible, experts interviewed by Izvestia believe. The next important level is 1950 points. If the market does not gain a foothold below this figure, then it is worth waiting for a recovery to the values of the beginning of the month. However, new pressure is very likely due to the Central Bank's key rate meeting on July 24. If the regulator tightens its rhetoric or raises the rate, the market will drop further. In the worst case, the index can fall below 1800 points, which is the level of 2015. How investors should act in the face of sales is in the Izvestia article.

Why did the Moscow Exchange index collapse

Since the beginning of the year, the stock market has lost almost 28% of its value. On Friday, July 17, the Moscow Exchange index fell by 2% and ended the evening session at a level below 1,980 points. This was the lowest value since October 2022.

The most extreme scenario now is a further drop in the index to 1,800 points, according to experts interviewed by Izvestia. In the baseline scenario, a drawdown by 1900 is possible if the Central Bank tightens its rhetoric on the key rate.

One of the main reasons for the market decline was the deteriorating expectations for a reduction in the key rate, said Ivan Efanov, an analyst at Cifra Broker. According to Rosstat, annual inflation accelerated to 6% in June after 5.3% in May. Against this background, investors are laying down a more cautious scenario for the actions of the Central Bank.

The market was counting on a faster easing of the Central Bank's policy, but the rise in fuel prices has dispersed inflationary risks, added Vladimir Chernov, analyst at Freedom Global. This forced the forecasts to be revised. Investors now expect the regulator to keep the rate at 14.25% following the July 24 meeting.

According to Rosstat, only from July 7 to July 13 gasoline rose in price by 2.3%, and diesel fuel — by 3.2%.

"Investors are reducing their positions on risky instruments due to expectations that disruptions in fuel supplies will negatively affect the economy," says Natalia Malykh, head of Finam's stock analysis department.

Additional pressure on the index was created by the discussion in the United States of a new sanctions package against Russia, Vladimir Chernov believes. We are talking about possible restrictions for buyers of Russian oil and gas, as well as measures against banks, tanker fleets and energy projects. This is an important factor for the Moscow Exchange index, because it mainly consists of shares of exporters.

However, the weakness of the market is related not only to external factors, but also to expectations of a slowdown in the economy, Natalia Malykh explained. If the GDP data confirms the deterioration of the situation, the Moscow Exchange index may gain a foothold at around 2,000 points. At the same time, much depends on how long the fuel problems last.

The dividend season puts additional pressure on the market. Shares of companies usually become cheaper by the amount of payments, so the index temporarily decreases even in a normal situation. In July, Rosneft, Tatneft, Polyus, MTS and Mosbirzhi have already passed the cut-offs, and in the coming days they will be carried out by Sber, VTB, Rostelecom and Dom.RF. According to Vladimir Chernov, only these four companies can temporarily reduce the index by about 2-3% more.

How to protect investments during a market downturn

In the near future, much will depend on the decision of the Bank of Russia and its further rate signals, according to Andrey Smirnov, an expert on the stock market at BCS World of Investments. If the regulator maintains a softer rhetoric, the market may receive support, but a harsh signal on inflation can trigger a new wave of sales.

In conditions of high uncertainty, experts advise against concentrating all funds only in stocks. Part of the portfolio can be stored in bonds or deposits, which now provide attractive returns due to high key rates, explained Vladimir Chernov.

At the same time, it is also risky to completely exit the market after a strong fall: an investor may miss the moment of reversal. A more balanced strategy is to buy securities gradually and choose companies with stable businesses, low debt burden and stable cash flows.

In the case of stocks, it is important to be careful, advised Vladimir Chernov. Investors should not try to guess the exact bottom of the market in order to buy stocks cheaper. A more reasonable approach remains the gradual formation of a position and the preservation of part of the funds in protective instruments, he said.

The level of 2000 points is considered an important psychological mark for investors, says Andrey Smirnov. If the index falls below, the pressure on the market may increase, as some participants begin to automatically reduce positions. According to him, if it consolidates below this mark, the next support zone may be the range of 1680-1780 points. However, this is rather an extreme scenario, since such levels correspond to the period of maximum market volatility in 2022.

After falling below 2000 points, the first buyers have already appeared on the market, who consider the current levels attractive for entry. According to Vladimir Chernov, investors who have been waiting for a strong correction for a long time may begin to gradually return to stocks. Therefore, it is now critically important that the index does not fall below 1,950 points — until then, the decline may not take hold, and the benchmark will eventually return to previous levels.