The fear of Omicron and the liquidation of the REIT: here’s what scared the markets on Monday

There was a bloodbath on Dalal Street on Monday as multiple headwinds hit global and domestic investors. The sharp rise in Omicron-based Covid-19 cases, particularly in the UK and other European countries, hawkish political stances by global central banks and concerns about a slowing economic recovery have marred the mood investors.

In intra-day trading, the Sensex 30-pack index plunged more than 1,300 points to a four-month low of 55,651. The wider Nifty50, on the other hand, fell below the 16 level. 600 and hit a low of 16,567.

The scale of the market was extremely paltry with five stocks falling for every stock that advanced on BSE.

That said, analysts expect the downtrend to end soon and that a sharp correction will lead to value buying at lower levels.

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“Negative feelings are unlikely to last long. The Omicron variant, although spreading rapidly, did not prove to be very virulent as feared. In addition, FIIs will soon turn long when valuations become attractive. Retail investors can use the corrections to buy high-quality stocks, especially financials, whose valuations have become attractive, ”said VK Vijaykumar, chief investment strategist at Geojit Financial Services.

Here’s what scared the streets on Monday:

Omicron scared

India’s Omicron coronavirus (Covid-19) count jumped to 151 on Sunday after Maharashtra recently reported six more cases.

Globally, the UK has reported over 12,000 confirmed cases of the rapidly spreading Omicron variant of the coronavirus; The Netherlands entered a full lockdown on Sunday until at least mid-January; and Germany has tightened travel restrictions for people coming from Britain.

These measures, analysts say, have soured sentiment on the streets as they pose a potential threat to economic recovery.

REIT sale

A combination of concerns about high valuations, interest rate hikes and the emergence of a new variant of Covid has led foreign portfolio investors (REITs) to remain net sellers of Indian stocks.

Since October, REITs have sold shares worth Rs 32,965 crore in the domestic market. Moreover, in December so far, REITs have withdrawn 17,696 crore from Rs. READ THE REIT STRATEGY HERE

According to Himanshu Srivastava, Associate Director – Research Director, Morningtar India, concerns about the highly transmissible Omicron variant of the coronavirus persist and have had an impact on the outlook for global growth.

“In addition, economic growth has also been relatively slow and India’s profits have not increased much,” he added.

Falling rupee

The national currency continued to expand its weakness against the greenback amid strong demand for the US dollar. The dollar index, which measures the currency against six major peers, stood at 96.629, not far from the high of 96.938 reached last month.

The US dollar hovered near the highest since July of last year against its major peers on Monday after a Federal Reserve official signaled that a first interest rate hike in the era of the pandemic could occur as early as March. READ MORE HERE

“Exporters are advised to hedge increases to the 76.25 levels. Importers are advised to hedge declines to the 74.50 level. The 3M range for the USDINR is 73.80 to 76.00 and the 6M range is 73.50 to 76.50, “said a note from IFA Global.

Financials, the most affected metals

While investors have moved away from bank and non-bank financial corporation (NBFC) stocks due to the weakness of the rupee (and the blow to Treasury revenues), export-oriented firms in the metallurgy and the automobile industry have borne the brunt of the panic sale.

The Nifty Metal index fell 4% during the day, while the Nifty Bank, Financial Services and Auto indices lost more than 3% each.

Individually, heavyweights like ICICI Bank, State Bank of India, HDFC Bank, Kotak Bank, Bajaj Finance, Bajaj Finserv, HDFC, Tata Steel, Jindal Steel, Tata Motors, M&M and Maruti Suzuki fell 3-5%. .

Weak Asian indices: China cuts rates

Asia-Pacific stocks were down on Monday, with China cutting its key rate for the first time in more than a year and a half. Mainland Chinese stocks were down, the Shanghai Composite Index down 0.75% and the Shenzhen Index down 1.365%. Hong Kong’s Hang Seng Index slipped 1.44 percent.

China on Monday announced a cut in its one-year prime lending rate from 3.85% to 3.8%, the first of its kind since April 2020.

Investors, however, have become cautious after the move, as China was the first major economy to shed most of the shock from the pandemic. But this year, especially since July, growth has been held back by subdued consumer spending, Beijing’s zero tolerance policy to control subsequent outbreaks, and tighter regulations, especially in the real estate sector.

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