New Virus Variant Weakens The Markets

Indian frontline equity indices BSE Sensex and Nifty 50 tumbled by ~5.90 per cent each during the fortnight. These benchmarks fell to their lowest level in three months, suffering their worst single-day drop since April 12, 2021 on November 26, 2021 on weak global cues as a consequence of the detection of the new corona virus variant, the Omicron, which could possibly be vaccine-resistant. Nifty 50 briefly dropped below its key psychological level of 17,000 to hit an intraday low of 16,985 and Sensex plunged by as much as 3 per cent i.e. 1,801 points. On similar lines, BSE Mid-Cap and Small-Cap indices plunged 5.77 per cent and 3.97 per cent to close at 24,846.51 and 28,071.41, respectively. 

BSE Realty index nosedived 10.68 per cent over the recent two-week period, emerging as the top loser. BSE Metal and Auto indices corrected by ~7.60 per cent each to close at 18,703.68 and 24,330.73, respectively. Only the BSE Healthcare index ended in the green territory with gains of 1.86 per cent. As per the Reserve Bank of India (RBI), India’s foreign exchange reserves increased by USD 289 million to USD 640.401 billion for the week ended November 19, 2021. Foreign currency assets (FCA), a major component of the overall reserves, increased by USD 225 million to touch USD 575.712 billion.

A Reuters’ poll of economists found that India’s economic recovery has likely strengthened in the previous quarter, boosted by services activity that recovered after pandemic-related mobility restrictions were eased. During the fortnight, shares of One 97 Communications, the operator of India’s biggest financial technology platform Paytm, hit the lower circuit of 20 per cent on listing day, eroding its market capitalisation by nearly a third as compared to its IPO valuation of Rs1.50 lakh crore i.e. USD 20 billion, and making it one of the worst debuts in the Indian stock market history.

The Paytm debacle dimmed the mood and added woes to investor sentiment. As a consequence, other technology start-ups such as MobiKwik and Oyo may delay their IPO by a few months. Goldman Sachs in its recent Macro Outlook 2022 note has revised its projection for gross domestic product (GDP) to 9.1 per cent from the earlier estimate of 8 per cent for calendar year 2022, while for FY22 it has pegged economic growth at 8.5 per cent. The global research and brokerage house expects a rise in core inflation as manufacturers pass on input cost increases to consumers and pegs India’s headline consumer price inflation at 5.8 per cent on a year-on-year basis in 2022 from 5.2 per cent in 2021.

A Reuters’ poll of economists found that India’s economic recovery has likely strengthened in the previous quarter, boosted by services activity that recovered after pandemic-related mobility restrictions were eased. 

Over the fortnight, Bharti Airtel announced that it will raise tariffs for all its prepaid users by up to 25 per cent from November 26, 20221 in a major bid to boost average revenue per user (ARPU) and improve its financial health. Immediately following Bharti Airtel’s price hike, Vodafone Idea raised its prepaid tariff plans today by 25 per cent. Likewise, later in the week Reliance Jio announced up to 21 per cent hike in its prepaid tariffs starting December 1, 2021, indicating an end to the low tariff regime in the telecom sector. Trading data shows that both DIIs and FIIs were net buyers during the fortnight to the tune of Rs15,712.70 crore and 9,805.89 crore, respectively.