Omicron to keep markets on the edge in last week of 2021
Concerns over new variant and a potential lockdown trigger nervousness among investors
PremiumIndian stock markets on Friday managed to recoup losses from the start of the week, but analysts said the Omicron coronavirus variant is likely to keep markets volatile going into the last week of the year.
On Friday, benchmark indices Sensex and Nifty broke their three-day positive streak to end 0.33% and 0.4% lower at 57,124.31 and 17,003.75, respectively. But both indices closed marginally above last week’s closing.
On Monday, the indices had crashed more than 2% over concerns on Omicron’s spread and fears that many countries may bring back stringent restrictions to contain the spread of the virus.
“The three-day rally was broken as worries of the Omicron variant spread and concerns of a fresh lockdown triggered nervousness among investors. Trading set up suggests that before a fresh breakout, the index is likely to consolidate within the range of 16,800 to 17,250 levels," said Amol Athawale, deputy vice-president - technical research, Kotak Securities Ltd.
Brokerage firm Motilal Oswal believes that while the relief rally seen this week may continue for some more time, volatility cannot be ruled out on account of potential risks from the Omicron variant and fragile global cues.
India recorded 122 cases of Omicron in a span of 24 hours, the highest in a day so far, pushing its tally to 358.
The cases have been detected across 17 states and Union territories so far. Maharashtra has recorded the highest number of 88 cases of Omicron, followed by Delhi with 67, Telangana 38, Tamil Nadu 34, Karnataka 31 and Gujarat 30.
A study by IIT Kanpur noted that the third wave of coronavirus in India could peak on 3 February 2022.
After around 10% correction, Nifty is now trading at 19x FY23 P/E and is no longer in the expensive zone, Motilal Oswal said.
Markets are also expected to find some respite from selling pressure as foreign institutional investor (FII) selling has seen a slowdown this week due to festive holidays, the brokerage said.
So far this month, FIIs have net sold Indian equities worth ₹12,897.65 crore, while domestic institutional investors have bought equities worth ₹27,000 crore.
FIIs have been consistent sellers of Indian equities since October, selling more than $4.7 billion worth of equities in the period.
“Markets will continue to see volatility and whipsaw-like movements as they respond to Omicron-related development and the monthly expiry," wrote Yesha Shah, head of equity research at Samco Securities.
“The week may see sectoral rotation, with beaten-down industries gaining traction. Because the underlying tone in realty and auto is optimistic, a purchase on dips approach can be used. IT is gaining momentum and trading at all-time highs, aided by Accenture’s stellar performance. Banks, on the other hand, remain weak and are unlikely to see significant buying until the end of the year. Investors can further examine the monthly expiry rollover data to capitalize on sectoral rotation and identify if the Santa Claus rally will occur," Shah said.
NTPC was the top loser in the Sensex pack on Friday, shedding 2.69%, followed by PowerGrid, Mahindra & Mahindra, Axis Bank, Kotak Bank, UltraTech Cement and Dr Reddy’s.
On the other hand, HCL Tech, Tech Mahindra, Asian Paints, Wipro, Infosys and Reliance Industries were among the gainers, surging up to 3.08%.
PTI contributed to this story.
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