Market outlook brightened as Omicron’s concerns eased

However, foreign institutional investors (FIIs) are awaiting the outcome of next week’s US Federal Reserve meeting, before pooling more funds for emerging markets. However, events such as the “taper tantrum,” the market turmoil that erupted in 2013 when the Fed surprised investors by indicating that it would open up its bond-buying program, appear unlikely.

Brokerage Credit Suisse expects India’s economic growth momentum to continue well into 2022, although the pace could slow down if energy prices remain high.

Neelkanth Mishra, co-head of equity strategy, Asia Pacific and India equity strategist at Credit Suisse, expects earnings to see a 5% upgrade in FY24. “Nifty earnings are recovering from a nearly decade-long slump where they grew just 4% between FY12 and FY19. Estimated to grow at 15% between FY19 and FY24, may see more upgrades. While Nifty earnings are only weakly correlated with the domestic economy, a substantial GDP upgrade should help offset the risks. In our view, a 5% upgrade in Nifty Earnings Per Share (EPS) is possible in FY24,” he said.

However, given the rise in India’s price-to-earnings (P/E) multiples, Credit Suisse’s global equity strategy team in February recommended India to be ‘small overweight’ for 2022. has been downgraded.

The major risks to economic growth and income upgrades are inflation, changes in monetary policy and renewed supply disruptions due to the pandemic.

There will be a meeting of the US Federal Reserve next week in which the deadline for reducing the bond purchase period will be decided. But, according to Bloomberg, that’s not everything that will be on the agenda at next week’s meeting. Fed officials could also signal a sharper and bigger tightening of monetary policy over the next three years – to an extent that markets have not predicted.

Any interest rate action by the US central bank could affect the flow of foreign liquidity into India. FIIs have sold Indian shares worth $802 million in December so far, making them net buyers of $4.73 billion in equity this year. However, domestic institutional investors have been buyers. they invested 8,190.02 crore more pumps into Indian stocks in December 30,522.02 crore so far in 2021.

According to Nomura, the emergence of the Omicron variant has added to the uncertainty, but the rough volatility in Asia is likely to extend through the first half of 2022, supported by easing supply constraints. However, it sees that India and Indonesia face larger risks next year, including lower vaccination rates and balance of payments deficits.

“Higher CPI (retail) inflation will trigger rapid policy normalization (100 basis points), even as growth continues to be impacted by mid-2022,” it said in a note on December 8.

Experts said that if the risk of Kovid reduces, then the RBI may change its accommodative stance.

“Volatile commodity prices, global supply disruptions, new mutations in the virus and financial market volatility pose downside risks to the outlook. The forecasts are in line with our expectations, but we will continue to monitor the evolving situation with respect to the new COVID version,” said Tanvi Gupta Jain, Chief India Economist, UBS Securities India.