November show worst for Sensex and Nifty indices since March 2020

Volatility continued on Tuesday as indices swing 1,300 pts to end 0.4% lower

The benchmark BSE Sensex and Nifty indices fell nearly 4 per cent in November, marking their worst monthly performance since March 2020, when countries were imposing lockdowns to check the spread of the Covid-19 pandemic.

Back then, the two benchmark indices had plunged 23 per cent each.

Cut to November 2021, and the detection of the Omicron variant, believed to be more transmissible than the Delta variant, has spooked world markets again amidst talk of lockdowns in many countries.

This is only the fifth instance when the Sensex and Nifty have clocked monthly declines since the mayhem of March 2020.

Wild swings

The jitters surrounding the Omicron variant affected stock markets the world over on Tuesday, too, as the benchmark indices saw another day of wild swings. The Sensex swung 1,316 points on the day as investors tried to assess the impact of the new variant and the effectiveness of vaccines against it.

The Sensex gained as much as 923 points and then at one point slipped close to 400 points over the previous day’s close. It ended the session at 57,065, with a decline of 195 points, or 0.34 per cent. The Nifty fell 70 points, a drop of 0.4 per cent, and ended the session at 16,983.

Tuesday’s wild swings were spurred by the remarks of the chief executive officer of vaccine maker Moderna, who said the existing vaccines might not be as effective against the Omicron variant.

He further said it might take months before jabs specific to this variant are available at scale. These comments come after South African scientists suggested that the Omicron variant presented relatively mild symptoms, which cheered the markets on Monday.

The World Health Organization (WHO) had warned on Monday that the new variant carried the risk of infection surges.

Analysts said the Moderna CEO’s comments had made investors worried about whether the pandemic’s impact will last longer and health systems across the globe will come under fresh strain. And since the information on how to deal with the new variant is still sketchy, they expect more volatility in the coming weeks.

‘More volatility’

“Going ahead, we expect the market to witness higher volatility in the near term, given the uncertainty around the new Omicron variant. 

The market direction will be decided as there is more clarity over the next few weeks regarding the variant’s transmission, impact on hospitalisation, mortality, etc. Till then travel, tourism, hospitality, and retail are some of the segments that are likely to underperform,” said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services.

Further, the US Federal Reserve Chief Jerome Powell said the new variant poses obstacles to the central bank’s mandate for stable prices and maximum employment. The emergence of the new variant has made investors wonder how central banks will tackle the economic impact as travel bans have hit international trade and the possibility of a rise in inflation due to supply disruptions.

The concerns of Omicron overshadowed the positive economic data from China.

“Markets will first react to the GDP (gross domestic product) numbers in early trades on Wednesday and the auto sales. Needless to say, the excessive news flow around the new Covid-19 variant would keep the volatility high. Keeping in mind the scenario, it’s prudent to continue with hedged positions until the markets stabilise,” said Ajit Mishra, vice-president – research, Religare Broking.

The market breadth was strong, with 1,778 stocks advancing and 1,471 declining. About 158 stocks hit 52-week highs on the BSE, and 284 were locked on the upper circuit. More than half of Sensex stocks dropped. Tata Steel was the worst-performing stock, falling 3.8 per cent. Metal stocks fell the most, and their gauge declined 2.34 per cent.