An apathetic exchange: what will pull the Russian stock market out of the depression
The Russian stock market continues to be apathetic. The Moscow Exchange index is trading near 3120 points, demonstrating a complete lack of directional movement. The main blue chips are stuck in narrow sideways movements, but the overall picture looks depressing even against the background of last year (exactly one year ago, the main index was at 3,350 points). Even lowering the key interest rate at the moment is not helping much, as is the seemingly favorable external environment. Capital prefers to sit in money market funds and bank deposits, ignoring dividend stories and corporate reports. When the Russian market returns to its normal state of growth, Izvestia figured out.
Exorbitant profitability of deposits
Normally, lowering the key interest rate makes loans cheaper, reduces the debt burden of issuers, and makes stocks more attractive compared to deposits. The profitability of debt instruments is decreasing, and issuers benefit from cheaper loans, which leads to higher profits and dividends. The Bank of Russia has indeed started an easing cycle. But in our case, it's not that simple.
— Now the Russian market practically ignores this factor: the "key" has decreased from a peak of 21% to 14.5%, but the Moscow Exchange index is below the levels of a year ago, when the key rate was 21%, — says Natalia Malykh, head of the stock analysis department at Finam.
According to her, the problem lies in the increased geopolitical risks and an excessively strong ruble, which limits the income of exporters.
The fundamental reason for investors' reluctance to buy stocks lies in the numbers of real returns. Ivan Efanov, an analyst at Cifra Broker, emphasizes that investors are cautiously assessing the future dynamics of inflation. But if inflation does slow down to the expected 5% by the end of the year, then the current rate of 14.5% will generate enormous real returns.
— Now the real risk-free yield is about 9.5%, which is abnormally high. This makes bonds and deposits much more attractive than investments in risky assets," the expert explains.
According to Izvestia's interlocutor, in order to start the flow of liquidity from deposits back into stocks, the key rate should drop to the level of 9-10%. In such a scenario, the real risk-free return will decrease to an adequate 4%, which will restore the meaning of investing in equity instruments.
The Iranian crisis: why expensive oil does not save
The second factor that has historically pulled the Russian market out of any drawdown has always been oil. The US-Israeli air campaign against Iran and the blocking of the Strait of Hormuz have inflated commodity prices. Brent crude oil prices, despite some correction amid expectations of a deal with the United States, are still confidently holding above $90 per barrel.
It is logical to expect that the Russian oil and gas sector, which occupies more than half of the weight in the Moscow Exchange index, should record super profits. Ivan Efanov agrees that the Middle East crisis is playing into the hands of domestic exporters. First of all, these are oil companies, as well as NOVATEK and Phosagro, which are becoming beneficiaries of high prices for hydrocarbons and fertilizers.
However, this positive is broken down by internal and external constraints. Natalia Malykh draws attention to the fact that even ultra-high dollar prices do not help companies much.
"The war in Iran has raised dollar prices for oil and gas, but our exporters cannot fully benefit because of the abnormally strong ruble," she explains.
A strong national currency eats up the entire dollar premium when converting revenue into rubles. In addition, the export potential of the sector is physically constrained by the ongoing attacks by Ukrainian drones on the domestic oil and gas processing infrastructure. As a result, the Moscow Stock Exchange's industry index of the oil and gas sector is currently trading below the levels of February 28, the date of the outbreak of a full—scale war in Iran. At the same time, there is also a long-term threat from expensive raw materials.
— The longer oil prices remain above $100 per barrel, the higher the chances of an increase in global inflation followed by a recession. And this will lead to a reduction in production, a decrease in demand, and eventually to a drop in prices for oil and industrial metals," warns Ivan Efanov.
Thus, the Middle East conflict carries more strategic risks for Russian companies than short-term benefits.
Is there a light at the end of the tunnel
The prospects for the market's exit from the current prostration depend on a combination of two factors: monetary and geopolitical.
According to Natalia Malykh, the weakening of the ruble would serve as a trigger for a positive revaluation of domestic securities. However, this is more likely to be the second half of 2026.
"The ruble may be pressured by a stronger reduction in the interest rate, which would reduce the attractiveness of ruble assets, but for this, the "key" should decrease to 10-12%," the source points out.
Ivan Efanov is also confident that sooner or later the stock market will move to growth, but for this, clear drivers must be formed that can attract fresh liquidity.
— In addition to the key rate, geopolitical uncertainty still looms over the market. We are currently not seeing any improvements in these two areas, and this affects investor behavior and creates apathy," the analyst argues.
Progress on at least one of these points can give the stock market a new lease of life. But until then, only individual names that are able to increase profits in the current difficult economic situation will feel better, and the broader market will be under pressure, he concludes.
Thus, the Moscow Exchange will spend the summer season of 2026 in standby mode. As long as the risk-free returns in the banking sector remain in double digits, and the strong ruble zeroes out raw material excess profits, the only working strategy for investors will remain the selective selection of companies with high dividend yields and low debt burden. Large-scale growth of the index is postponed until a more aggressive easing of the Central Bank's policy.
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