Are equity markets prepared for mini-lockdowns?

After Delhi, Karnataka became the second to impose a weekend curfew in the state, starting this week, amid rising Covid-19 cases.
With positivity rate approaching the 10%-mark in Delhi and around nearly 3% in Karnataka, the states are eyeing a total curfew over the weekend, including a shutdown of non-essential shops, malls and more restrictions on public transport, weddings and funerals.
Maharashtra, Uttar Pradesh, West Bengal, Haryana and Punjab, too, have imposed similar restrictions.

Yet, the sporadic curbs and rise in coronavirus cases, have failed to deter market bulls from their march.
In the first three days of 2022, the BSE Sensex has already surged nearly 2,000 points, while the Nifty50 has climbed about 600 points.
So, are the bulls ignoring a potential threat from a third wave and localised lockdown?
Vaibhav Sanghavi, Co-CEO of Avendus Capital decodes this market behaviour.

Vinod Nair, head of research at Geojit Financial Services, too, believes that since the severity of the Omicron variant remains low, the markets expect restrictions to be removed soon. 

That said, mild consolidation can’t be ruled out over the next few weeks as investor focus will shift to key events.
 
In nutshell, expectation of healthy Q3 earnings from India Inc and resumption of FPI buying are outweighing concerns surrounding new virus variants.
Thus, any lockdown, analysts believe, may not be met with serious correction as market participants will eye economic growth and the government’s reform agenda.
 
As regards Thursday, weekly F&O expiry and stock-specific action will remain key market triggers.
 

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