Omicron Edition scares investors off as stock tanks 2%

Foreign capital inflows into Indian markets also kept investors worried as Sensex closed 2.09% lower at 55,822.01 and Nifty ended 2.18% lower at 16,614.20. Intraday, both the indices lost 3.3% and 3.39% respectively.

The Sensex and Nifty have lost 5.04% and 5.12%, respectively, since December 10, while the volatility index VIX has gained 18.05%, indicating that investors are worried about the market’s direction in the coming days.

Omicron’s rising cases have added to global macro challenges such as inflation and tightening of monetary policies by major central banks and are likely to keep investors on edge in the coming days. As a result, selling pressure may persist in the markets.

“Markets have corrected ~10% from their peak, driven by continued FII selling, tightening of monetary policy by central banks globally and concerns over economic recovery due to rising Omicron cases. The overall market breadth remains negative and a strong positive trigger will be required to reverse the current negative trend. Selling pressure continues at higher levels, and any recovery or bounce is being used by traders to move the market lower. Thus, we maintain our cautious outlook on the market for the next few days,” said brokerage Motilal Oswal in a note on Monday.

Market experts see inflation and Omicron concerns to play a major role in further market direction and do not rule out further corrections.

“The selloff in today’s trade is one of the most significant selling pressures we have seen on Dalal Street recently. As long as headline inflation and Omicron risks remain high, investors need to remain nimble as the economic recovery will likely be in a zig-zag mode. The ongoing pessimism indicates that the recent dramatic crash is nowhere near the end,” said Prashant Taapsee, Vice President (Research), Mehta Equities Ltd.

Other Asian markets were also under selling pressure on Monday, with Japan’s Nikkei 225 falling 2.13% and Hong Kong’s Hang Seng down 1.93%, while the Shanghai Composite Index closed 1.07% lower, as investors especially in Europe There was a fear of a dire pandemic. Due to increase in the cases of covid.

“Asian stock markets fell, and oil prices fell on Monday as a surge in Omicron cases imposed tighter sanctions in Europe and threatened to drag the global economy into the new year. European shares tumbled over 2% on Monday amid a global sell-off in equities, with investors fretting over the tight pandemic spectacle affecting the global economy as cases of the Omicron Covid-19 variant surge,” said Deepak Jasani, Said Head of Retail Research at HDFC Securities.

Jasani said other global signals such as the political deadlock in the US over President Joe Biden’s massive infrastructure spending bill are also worrying investors.

“Investors were also shocked by the news that Senator Joe Manchin would not support Biden’s $1.75 trillion Build Back Better bill, dealing a huge blow to the president and his hopes of an additional boost to the world’s top economy. Goldman Sachs lowered its forecast for US real GDP for the first quarter of 2022 to 2% versus 3%, and marginally lowered estimates for the second and third quarters,” Jasani said.

Domestic market watchers will keep an eye on foreign institutional investors who have been selling since October. This trend continues in December as well.

“Traders were also worried as foreign portfolio investors (FPIs) have pulled out 17,696 crore from Indian markets so far in December amid uncertainty. Additional pressure came as RBI data showed a fall in forex reserves for the third week in a row, with India’s forex reserves falling by $77 million to $635.83 billion for the week ended December 10, beating already weak sentiments. negatively impacted,” said Narendra Solanki, head of research, investment services, Anand Rathi Financial Services.