Although markets ended in the green on Monday, investors were worried about uncertainties related to the new viral strain of SARS-CoV-2 first detected in South Africa. Analysts expect stocks to continue to remain volatile as the Omicron version could disrupt the economic recovery again.
On Monday, the BSE Sensex ended the day at 57,260.58, up 153.43 points or 0.27%. Nifty rose 27.50 points, or 0.16%, to 17,053.95. “We expect the market to see higher volatility in the near term. While the impact of the new version on hospitalization and mortality remains unknown, and it is still not known in India, we expect That higher volatility will continue till more clarity and data emerge on such a trajectory,” Gautam Duggad, Head of Research, Institutional Equities, Motilal Oswal Financial Services Ltd, said.
Duggad expects the sector rotation to continue and defensives like pharma, IT and consumer to come back till the sentiments improve. He said the equity valuation, post a pullback, at 23.3 times the FY22 Nifty earnings per share (EPS) basis, is now relatively more reasonable.
After touching a record high on October 18, Nifty is down 8%, led by global factors such as US Fed’s taper announcement, rise in bond yields, higher crude oil prices and strengthening US dollar index. Has happened. Despite the corrections, India continues to be one of the top performers this year, with Nifty up 21% in 2021, compared to the flat performance of the MSCI EM index.
On Monday, most of the Asia-Pacific markets closed with a fall. Japan’s Nikkei fell 1.63%, Hong Kong’s Hang Seng index fell 0.95% and South Korea’s Kospi fell 0.92%.
The World Health Organization said the omicron version of the coronavirus carries a very high risk and uncertainty remains how contagious and dangerous the strain is. Japan said on Monday it would close its borders to foreigners to prevent the spread of Omicron, joining Israel in enforcing the strictest border controls since its discovery in South Africa, according to Reuters.
Foreign institutional investors have been gradually selling Indian shares since the end of November. They sold Indian equities worth nearly $2 billion just last week, raising concerns over liquidity runs out.
Credit Suisse said that given that India is the most expensive market in Asia, this suggests that a large part of the recovery has been paid for. “We expect Indian equities to perform in line with Asian equities in 2022… the Indian economy recovers at a faster pace with more relaxations than expected as the Covid-19 contagion. Favorable monetary policy has accelerated economic and income recovery,” it said in a note on November 29.
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