JOIN USGlobal cues, reduced Omicron fears help market recover
Indian markets, post the recent pullback, recouped some of the losses amidst volatility and managed to close with a marginal gain of ~0.1%. Both Nifty/Sensex ended almost flat at 17,004/57,124. The broader market, on the other hand, was mixed with the Nifty Smallcap 100 index ending unchanged while the Midcap 100 fell 1.1%.
Sector-wise it was a mixed bag with defensives seeing some buying interest. IT was the biggest gainer – up 2.9% followed by Pharma (+2%) and FMCG (+1.3%), while Banks and Financials were the biggest losers – down ~2%.
Foreign institutional investors (FII) continue to be persistent sellers since October and have sold almost Rs 33,000 crore this month so far. Domestic institutional investors, on the other hand, have counterbalanced and bought equities worth more than Rs 27,000 crore over the same period.
Global cues turned positive over strong economic data from the US and reduced fear over the severity of the Omicron variant. Sentiments got a boost as both US President and UK Prime Minister ruled out strict lockdowns or new curbs ahead of the Christmas and new year vacation.
There was also optimism among investors that the economic growth might overcome risks from the Omicron variant. Cheerfulness also continued as US President Joe Biden said it is still possible to reach a deal with Senator Joe Manchin to push the $2 trillion Build Back Better bill through Congress.
On the domestic front, Nifty was volatile this week following news flows around Omicron. Some of the states have again announced night curfews once again following the rise in Omicron cases in India. However, FII selling has reduced sharply over the last few days due to the festive holidays.
After around 10% correction, Nifty is now trading at 19x FY23 P/E and is no longer in the expensive zone. We thus suggest long term investors take benefit of the volatile market and add on to their portfolios gradually at lower levels. While the relief rally might continue for some more time, volatility also cannot be ruled out on account of potential risk from the Omicron variant and fragile global cues.
Next week though, the participation in the market could be a little lacklustre with thin volume as investors get into the new year celebration mood.
(The writer is Head-Retail Research at Motilal Oswal Financial Services Limited)
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