The Effects of the Omicron Outbreak on Indian Stock Markets | Motilal Oswal

Omicron Outbreak on Indian Stock Markets

The Indian stock market has been firm in recent times amidst the omicron outbreak. On the 12th of January, 2022, the Sensex was up more than 500 points. Meanwhile, Nifty made a noon trade of over 18,200. The stock market investments during omicron outbreak are currently largely unaffected. To find out more in detail about the effect of pandemic on stock markets, read on. 

  • Who Has Been Investing?

While the big bulls of the Indian stock market over the past six weeks have been the domestic institutional investors, the foreign portfolio investors have been the net sellers, thus supporting the recent rally by an FPI inlow. The National Securities Depository Limited data displays how the foreign portfolio investors over the past three trading sessions have invested a net amount of Rs. 4,306 crore. This is in contrast to the net amount of over Rs. 40,000 crore that the foreign portfolio investors have pulled out since the 22nd of November, 2021 - amid certain indications of the US Federal Reserve planning on tightening its monetary policies.

Investors are drawing comfort currently because while the OMICRON is a fast-spreading variant of the Covid-19 coronavirus, it is causing less severe diseases. As a result, the state governments are not going for stringent lockdowns which have the possibility of hurting economic activity to a great extent.

  • Concerns Of The Effect Of Pandemic On Stock Markets

The Indian stock market in present times is likely to face bouts of volatility caused due to concerns over higher interest rates, inflation, and an increasing number of Covid cases.

On Wednesday, the Nasdaq index fell 3.3% and the Dow Jones 1.07%. The Nikkei index in Japan fell sharply as well by 2.9%. The Sensex on the other hand fell by 1% or 621 points, closing at 59,601.84 on last Thursday. 

The following are some of the concerns that have come up with respect to the stock market investments during omicron outbreak:

  • There might be a larger FPI funds outflow caused by the rise in rate of interest in the USA which is likely to happen sooner than it had been expected. 
  • This, as a result, would lead to a correction in the world’s emerging economies. 
  • This would also be leading to the shift of funds from equities to debt instruments, thus leading to weaknesses in the equities. 

If the states begin to impose lockdowns, there is a possibility of the economy taking a major hit all over again, right after having seen a fragile recovery. Investors have also been waiting for the reports by the corporate sector on the third quarter earnings so that they can think about new Demat account to open. The participants of the Indian stock market say that all of these factors have a role to play in keeping the market volatile in the upcoming two to three weeks. 

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