Markets May Continue To Fall Next Week If Omicron Cases Rise

The markets took a serious knock last week, with the Sensex dropping almost 4% in trade. The markets have now fallen a solid 9% from the 52-week highs seen in the month of October.

When the Sensex crossed the 60,000 points level, we have been constantly advising investors not to invest large sums and take profits off the table at least partially. The concerns for the markets are over a new variant of Covid variant called Omicron.

The variant, first known as B.1.1.529 and now named omicron, has been detected in small numbers in South Africa, WHO officials said. The omicron variant has since been found in the United Kingdom Israel, Belgium, the Netherlands, and Hong Kong. This resulted in the European markets falling more than 3% and the Dow Jones Industrial Average plunging almost 1,000 points in trade.
Going ahead, if the pace of infections rise, we might see the markets seeing a sharper fall.

"Domestic market has corrected ~9% from its peak as weak global cues, persistent selling by FIIs and premium valuation has made investors cautious. Going ahead market is likely to continue being under pressure till clarity emerges over how dangerous this new covid variant can be. Already market is precarious over timing of fed raising interest rate. With emergence of new, highly mutated Covid-19 variant and EU announcing temporary ban of flights from South Africa along with few EU countries already under full lockdown scenario, market sentiments have taken a big blow.

In such a scenario, it is wise to grab the opportunity and invest in stock that are backed by strong fundamentals and sound management. Blue chip stocks which act as safe havens for investors, provides good entry point at lower levels to invest from long term perspective. Also one can look for defensive sector stocks," Siddhartha Khemka, Head, Retail Research, Motilal Oswal Financial Services Ltd.

As we write concerns over the virus are growing and there are worries over a renewed lockdown in some part of the world. Israel is to close its borders to all foreigners, while Australia has detected the first variant.

"Equity markets in the near term will closely follow the impact of new COVID variant, inflation data, and Central Bank policies," said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, as quoted by PTI.