Russian MoEx Index is Rapidly Losing Steam: Is it a Full-Scale Selloff or Just a Technical Correction?

Russian stocks are still undergoing a technical correction. The Moscow Exchange index fell by 1.61%, falling to 3,195.82 points as of 3:00 p.m. Moscow time. The index value fell below 3200 points, for the first time in a week and a half, the previous time the index traded below this level on November 3, 2023. The dollar-based RTS index decreased by 1.01% and reached 1106.11 points.

The acceleration of the decline of the index is due to a number of factors: the strengthening of the ruble, a weakening trend in the oil market, as well as a high key interest rate and the preferred prospects of its further increase.

Most analysts don't see any compelling evidence behind a strong strengthening of the ruble going forward, so that there would be for USDRUB preconditions of breaking through the level of 90 and aspiring down to the area of 85-86 per dollar. It is not in the interests of Russia’s Ministry of Finance and its growing budget deficit either.

Therefore, the basic scenario for now is that the current trend is nothing greater than a continuation of technical correction from the overbought area, formed in panic moods due to the rapidly depreciating ruble at the end of October, for the second time this year. Levels technical analysis suggests that we may see 3050 on the MoRx Index, which is about another 2.5% down. After that, the recovery will start, but on a less steep trajectory.