Indian stock markets continued to gain for fourth day in a row even as increasing covid cases leading to stricter restrictions have increased market volatility. On Wednesday, the Sensex reclaimed 60000-mark for first time since 17 November last year. Expectations that the Reserve Bank may delay interest rate hike due to possible third wave of covid case have also added to investor optimism.
The 30-share index were up 367.22 points or 0.61% ending at 60,223.15. The Nifty climbed 120 points or 0.67% at 17,925.25.
“In a highly volatile session, the domestic market witnessed a recovery following a mild dip though the global sentiments were not in favour of bulls. Increasing covid cases leading to stricter restrictions has pressurised market volatility. The banking sector outshone other sectoral indices as few private lenders reported double-digit business growth during the third quarter. IT stocks took a blow as investors awaited the onset of the quarterly results season. US and Asian markets traded weak ahead of the release of the US Fed meeting minutes while European indexes held ground,” Vinod Nair, head of research, Geojit Financial Services said.
Markets in other Asia-Pacific region were largely lower on Wednesday, as higher US Treasury yields weighed on global tech firms and pushed the dollar to a five-year high against Japan’s yen. US yields rose on Tuesday as bond investors geared up for interest rate hikes from the Federal Reserve by mid-year to curb stubbornly high inflation, Reuters reported.
Hong Kong’s Hang Seng index was down 1.64%, the Shanghai composite in China slipped 1.02% while in South Korea, the Kospi dropped 1.18%.
According to Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services Ltd as global markets remained on subdued note as US Treasury yields rose higher as investors await the minutes from the U.S. Federal Reserve’s latest meeting for clues on the central bank’s interest rate hike moves. However, he remains optimistic expecting the Nifty to deliver around 12-15% returns in 2022, supported by continuation of economic recovery and strong earnings growth. “After the recent correction, Nifty is now trading at 20 times 12 month forward price to earnings (PE) which is no longer in the expensive zone. While the market trend might be volatile in the near term on account of potential risk from Omicron variant, upcoming budget and fragile global cues, in the long run, strong earnings delivery along with positive macro-economic data would hold the key to drive markets upwards,” Khemka said.
India volatility index or India VIX, however, climbed 6.87% 0n Wednesday indicating a gradual increase in anxiety and nervousness among investors. Indian markets have started the year with a bang while both the benchmark indices Sensex and Nifty gaining over 3% each.
Foreign institutional investors (FIIs) have started to buy Indian equities and were net buyers of Indian shares worth $493.66 million in 2022 so far while draining out $4.76 billion in the last quarter of 2021. Domestic institutional investors have pumped ₹1336.08 crore into stocks in January so far.
According to Aditi Nayar, chief economist, ICRA Limited with the recent surge in covid-19 cases and widening of restrictions leading to heightened uncertainty, it is increasingly unlikely that the Reserve Bank of India will commence with policy normalisation in February 2022 itself, unless inflation provides an acutely negative surprise.
“Our early analysis suggests that the impact of an Omicron wave may be limited to one quarter in terms of the duration of the surge in fresh cases, as well as the economic impact given the better preparedness of governments, the health care system and households. However, there continues to be a lot of uncertainty around this. The impact on GDP growth will depend on the extent to which restrictions need to be extended across states in the coming weeks. As of now, we see a modest downside to our forecast of FY2022 GDP expansion of 9.0%,” she said.
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