Hope lingers for market amid gloom over Omicron variant Covid-19

Published On: Monday, November 29, 2021 | By:

Hope lingers for market amid gloom over Omicron variant Covid-19

The BSE benchmark index, the Sensex, dipped to a low of 56,383 in early deals today(29th Nov.2021), and then rebounded and surged to a high of 57,627 - up 1,244 points from the day's low. The BSE index, which, was up over 500 points at the highs of the day eventually ended with a minor gain of 154 points at 57,261. The NSE Nifty cracked to a low of 16,782 in opening deals and then pulled back to a high of 17,161. The Nifty 50 finally settled at 17,054, up 28 points. Benchmark indices the Nifty and Sensex have fallen as much as 8 percent from their all-time highs last month. The high valuation was already a hurdle for the market and now, the new risk emerging on the Covid-19 front has added fuel to the fire. It is a fact that despite the pullback, India remains among the top performers in CY21, with the Nifty up 21 percent in CY21 YTD versus a flattish performance of the MSCI EM Index. But a correction in the market was overdue.

Now the most basic question analysts are debating is whether the market will fall further and drop into the bear zone, i.e., down 20 per cent from the highs, or will it start recovering on bottom fishing by investors.

A near unanimous view on Dalal Street is that the biggest risk to the market is the uncertainties around the Omicron variant of coronavirus that the World Health Organization (WHO) has classified as “a variant of concern”.

Health experts across the world are trying to understand the latest mutation. However, scientists in South Africa said they had linked it to an exponential rise of infections in their country. However, there is a silver lining in the news.

Citing doctors treating the Omicront variant patients, a recent report pointed out that although it was more infectious, the effects were much milder and most of the impacted patients were unvaccinated, which meant vaccines might be effective against this strain.

Some health experts are hoping a more infectious but much milder strain might actually help in building herd immunity among those who don’t want to get vaccinated or are unable to get vaccinated. In fact, if it replaced the deadlier Delta strain as the dominant one, not many will be complaining. It is important to note that these are still unverified theories and it may take up to two weeks to understand and assess the complete impact of the new variant. Nonetheless, it has given hopes to investors.

Today, the market wobbled around the flatline but recovered later on.

But there has been some positive news as well. Central banks might delay rate hikes, given the emergence of the new virus variant. Plus, the near 8-year tepid profit growth for India Inc was over and there were clear signs of growth and profit revival, said analysts.

“Corporate earnings in Q2FY22 were better than expected, despite sharp input cost inflation impacting several sectors. Earnings estimates for FY22/FY23 are stable and haven't seen any downward revision, strengthening the belief in the resumption of a new earnings cycle.” said a report.

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