Markets will look past Omicron scare and move higher: Analysts

Back home, India has logged 653 cases of the Omicron variant of coronavirus across 21 states and Union Territories so far. Of this, 186 have recovered or migrated, official data suggested on Tuesday

It has been a volatile phase for the equity markets over the past few sessions as they grapple with multiple headwinds, including the policies of various global central banks amid the rising Covid cases (Omicron variant). Indian markets, too, have been no different and have performed mostly in line with their global peers.

Any further serious spread of virus and contraction of the global economy through lockdowns, G Chokkalingam, founder and chief investment officer at Equinomics Research believes, would certainly lead to slow or even postponement of reversal of monetary policies by the major central banks. That said, he believes there would not be any major fall in the global equity markets in the short-term but does not rule out bouts of volatility going ahead.

“The single most concern for global equity markets at this juncture is the fast spread of the Omicron variant of Covid. What we learn is that it spreads very fast, but vaccinated people face less illness as compared to the previous variant. Western world, thanks to huge accumulated wealth earlier, is opting for lockdowns and also focusing on extending vaccination and also boosters. We believe that in this time of coronavirus wave, the adverse impact on the global markets would be lesser,” he said.

Back home, India has logged 653 cases of the Omicron variant of coronavirus across 21 states and Union Territories (UTs) so far. Of this, 186 have recovered or migrated, according to the Union Health Ministry data updated on Tuesday. Maharashtra recorded the maximum number of 167 cases followed by Delhi at 165, Kerala 57, Telangana 55, Gujarat 49 and Rajasthan 46, reports suggested Tuesday.

“We do not expect the domestic market to fall more than 2 per cent to 4 per cent from the current level in the worst-case scenario. Overall, around 10 per cent to 12 per cent correction in the Sensex and about Rs 20 to 25 trillion correction in the entire market-cap would be a healthy one,” Chokkalingam adds.

As a precautionary measure, several states have imposed travel restrictions at night. On its part, the central government has cleared a Covid vaccination program for children in the age group 15 to 18 years and health workers starting January 3. That apart, those aged over 60 years having co-morbidities will be given the booster dose.

Technical chartists, too, believe Indian equities remain in a bull-phase and are likely to climb the wall of worry as they move ahead in 2022. Going by the history of three decades, those at ICICI Securities for instance, suggest the ongoing bull-market to extend for the next few years. 

“Our Nifty target for calendar year 2022 (CY22) is 21,000 based on classical chart reading and bottom-up prognosis of Nifty constituents, wherein strong support exists at the 15,500 levels. While the midcap space is expected to extend its outperformance, we expect information technology (IT) sector to lead the rally, supported by cyclicals like capital goods, BFSI, real estate and auto,” wrote Dharmesh Shah, assistant vice-president for technical analysis at ICICI Securities in a recent co-authored note.

Economists, too, believe the impact of the third wave of the Covid pandemic triggered by the Omicron variant will be limited, and the government will resort to accelerated vaccination programs and restrict mobility in the impacted areas rather than impose a blanket lockdown going ahead.

“2021 helped us understand the virus better, which in turn shaped policy responses. Nimbleness in creating health infrastructure paved the way for chiselled responses to limit economic spillovers vis-à-vis the first wave. As such, while we do remain cautious of a third wave in India, we believe its economic impact could potentially be short-lived and restrained,” wrote Shubhada Rao, founder, Quant Eco Research in a recent co-authored note with Yuvika Singhal and Vivek Kumar.