India’s stock fall completes Asian rout on Omicron spread
11:41, 20 December 2021
India stock plummeted at the start of a new week, completing a rout across Asia, as the spread of the coronavirus variant Omicron triggered a widespread selloff.
The bellwether BSE SENSEX Index ended at 55,822 points, 2.09% lower than its previous close. The most-traded National Stock Exchange’s (NSE) NIFTY 50 Index finished 2.18% lower at 16,614.2 points. The last close of the local indices was the lowest level since 27 August.
“Markets reacted to the news of a sharp jump in the COVID cases globally which may result in a lockdown. Though the situation is under control domestically at present, any impact on the global economic recovery would dent our prospects too. The benchmark remained under pressure in the first half as noticeable selling was witnessed across the board,” said Ajit Mishra, vice president for research at Religare Broking Limited.
Length, breadth of fall
All the 11 sectoral indices ended in the negative zone with the NIFTY Realty Index falling as much as 4.9% and the NIFTY PSU Bank Index weakening 4.4%. The advance-decline share ratio – the number of advancing shares divided by the number of declining shares – on the NSE was 238–1,837 today. The number of advances was at the lowest since 12 April.
As many as 70 stocks fell to 52-week lows, including Colgate-Palmolive India, DCB Bank, Exide Industries, Gillette India, HDFC Asset Management Company and Hero Motocorp among others.
“India has been undergoing a phase of consolidation in the last 2 months. The current sell-off is due to a rapid rise in foreign institutional-investor-selling triggered by hawkish world central banks’ policy, and a cautious view on [the] Indian market due to high valuation compared to peers, and a drop in retail inflows,” said Vinod Nair, Head of Research at Geojit Financial Services.
According to Nair, the fall may be short-lived as the level of indices is close to the last phase of consolidation in terms of price correction.
Variant spreads across globe
Twelve people in the UK have died with the Omicron variant of the coronavirus and 104 people were currently in hospital with Omicron, Britain’s deputy prime minister Dominic Raab said on Monday.
“In assessing the situation we rely very heavily on the real data coming through and it will take a little bit more time to assess this critical issue of the severity of Omicron,” Raab said.
The UK reported 82,886 new Covid-19 cases on Sunday and 45 deaths within 28 days of a positive test. Cases were up 51.9% over the seven days to 19 December compared with the previous week, said the government. India’s Omicron tally too is rising at a rapid pace with 170 cases as of today, up from 96 at the end of last week.
The sell-off spread across the continent as European markets opened sharply lower today with shares in Germany off the most. The DAX traded 2.15% lower while France’s CAC 40 weakened by 1.40% and London’s FTSE 100 lowered by 1.39%.
Analysts like Mishra and Nair fear any further negative development may further intensify the exit of foreign investors from the nation’s equities.
Surging Omicron cases can potentially trigger tighter restrictions across impacted countries and threaten to drag on the global economy into the new year.
Deepak Jasani, head of retail research at HDFC Securities said: “The sell-off in stocks across the globe is running at more than 2% and investors are fretting over the spectre of tighter pandemic curbs hitting the global economy as cases of the Omicron Covid-19 variant surge.”
Silver lining
However, investors drew some comfort from the level of interest evidenced in new stock sales. The initial public offering (IPO) of Supriya Lifescience subscribed 28.27 times on its final day today. The issue attracted bids for 410 million equity shares against the IPO size of 14.5 million shares on offer, data provided by the exchanges shows.
The IPO of CMS Info Systems Ltd., India’s largest cash management company based on the number of automated teller machines, opens for subscription on 21 December. The company plans to raise as much as INR11bn.
“Some pockets have become fair however the overall market is still trading at the upper-hand which will continue to affect the performance of the broad market, in the short-term. Long-term investors can chip into high quality stocks with a focus on defensives and India-focused businesses,” Geojit’s Nair said.
“While a small recovery is likely in the near term, the NIFTY 50 Index has a good support from the 15860–16245 band where it may find durable support,” Jasani added.
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