Omicron variant's impact on stock markets

Indices Conclude the Week on a Bearish Note
Despite experiencing a temporary two day winning streak, the Indian benchmark indices marked the end of yet another bearish week - the week ended Friday December 3rd - settling in the red. Both indices initially displayed positive notes at the start of the trading day, yet exhibited stagnancy and depreciation as the day progressed, a theme which has become ubiquitous over the better of the last month or so.

BSE Sensex decreased by 1.3% to conclude the week at 57,696.46, whilst NSE Nifty 50 exhibited a similar pattern to shrink by 1.2% to continue to underperform, with a closing valuation of 17,196.70. 

Friday’s performances were primarily the result of decreasing values of uncertain cues in conjunction with global bearish indicators. This subsequently prompted investors to reduce their holdings in FMCG, auto, banking IT and financial services stocks, which contributed the most to the waning. Speaking on a more broader level, Indian benchmarks throughout the entirety of the month of 

November, have mostly adhered to the recurring sequence of having bearish growth with minimal days of increases. For instance, Sensex last closed above the 60,000 mark on the 17th of November, whereas last closed above 18,000 2 days prior to that.

According to Money Control the benchmarks began the day with an uptick tracking in supporting global implications, only for the indices to be brought down as a result of inflated selling pressures.  

The failure of the markets to extend the midweek rebounding and subsequently become reclaimed by bearish cues, not only in India but on an international level as well, could be the result of incensed concern and agitation instigated by the propagation of the Omicron (B.1.1.529) variant.

Nifty’s downtick is proportionally more concerning as it’s downtrend continues further, with speculations that the index may even drop down to the 16,800 levels, if bearish market corrections and sluggish moving averages continue. 

Omicron’s Advent Launches a New Wave of Global Economic Uncertainty
Saturnine international market performances over the past week have, disconcerting investors globally, can be primarily considered the result of the emergence of the virulent Omicron variant, with an increasing number of countries detecting cases of the new variant. 

Just as the world optimistically appeared to be moving into the stage in which robust rebounding across all sectors could finally occur fluidly, the threat of an aggravated wave of virus transmission will most definitely present significant interruptions towards economic recovery.

The immense disquietude of the new variant will reportedly cause the International Monetary Fund to likely to slash its global economic growth projections, and the rapid reversal on the lifting of travel bans and reimpositions on stringer restrictions will largely stymie large scale consumer transactions and severely degrade economic activity. India has devastatingly experienced immense economic and societal calamity as a result of the introduction of the Delta variant, which strongly affected markets nationally, and cannot afford to re-experience this desecration once more.

Omicron, the variant the W.H.O. states has been found in over 40 countries, has the potential to be more transmissible and vaccine resistant, which can cause governments, particularly those in developing countries and in countries with low vaccination rates, to be forced to expend exorbitant amounts as a means of mitigating the spread. Inequitable and excess resource allocation in developed nations to exacerbate.

Regarding global and national markets specifically, minimised international travel, lopsided economic structures and the potential for inflation to increase further are all major threats which have a high possibility of occurring, as a result of the omicron variant. 

On both a micro and macro scale this would diminish market and economic development significantly, and hence investors and governments are remaining actively seized on the matter to gain more certainty on the immediate future.

With inputs from MoneyControl, Economic Times, India Today and Financial Express
Written By: Ronojoy Borpujari