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Indian stock markets nosedived today while the rupee also dropped against the US dollar as a surge in global Omicron COVID-19 cases threatened to derail economic recovery. The Sensex fell over 1,400 points when it hit 55,548 at day's low while Nifty slumped 2% to breach 16,600.  In just two days, investors became poorer by over 11 lakh crore as domestic equity market continued to face severe drubbing amid a global selloff.

The rupee dropped 9 paise to trade at 76.15 against the US dollar in opening deals on Monday as sustained sell-offs in domestic equities by foreign investors hurt the local currency's recovery prospects.

Fresh lockdowns in parts of Europe to stem the rapid spread of omicron are also unsettling investors and weighing on risk sentiment. The Netherlands went into lockdown on Sunday and the possibility of more COVID-19 restrictions being imposed ahead of the Christmas.

Other Asian markets were lower today while US equity futures and crude oil fell  amid concerns about more omicron-induced curbs and after a setback for President Joe Biden’s economic agenda prompted Goldman Sachs Group Inc. to cut forecasts for U.S. growth. Traders were assessing the latest comments from U.S. Senator Joe Manchin, who left Democrats with few options for reviving Biden’s agenda after rejecting the roughly $2 trillion tax-and-spending package. Goldman economists reduced their U.S. economic growth forecasts in the wake of the senator’s move.

Like domestic equities, the rupee too has been under pressure amid a stronger US dollar and weak global sentiment .

The selling in Indian markets can be attributed to hawkish Fed, rupee weakness, and most importantly relentless selling by FIIs, said Santosh Meena, Head of Research, Swastika Investmart Ltd.

“Global markets are also turning volatile and showing weakness that may also cause volatility in the Indian equity market. Cases of omicron variant are rising sharply and many countries have started to take some kind of restriction measures that are also hurting the market sentiments. The dollar index is trying to inch upward on the back of hawkish fed and weakness in some emerging market currencies. Amid all, FIIs' behavior will play a critical role in the direction of our market," he added.

“The lows of Friday was a ray of hope but the index has opened with a gap down this morning which cements the validity of a downtrend. The upside for the index is capped for the time being and every rally up can be used to short this market for a target of 16400," said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments.

Gaurav Garg, Head of Research, Capitalvia Global Research, said: “The Indian Benchmarks made gap-down opening today amid rising Omicron coronavirus cases worldwide. Traders will be cautious with continuous net outflow of foreign funds as Foreign Portfolio Investors (FPIs) have pulled out Rs. 17,696 from the Indian markets in December month so far. RBI data showed decline in India’s forex reserves for the third consecutive week. Our research suggests that the levels of 16350 may act as support levels in the market. If the market unable to sustain above the level of 16350, we can expect the market to trade till the lower range of 16000-16100." 

Global markets, Omicron variant, the dollar index, and FIIs' behavior will be key factors to drive the market next week, say analysts. 

 

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