Omicron Variant: Impact on the Indian Stock Market

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The world has been reeling from the impacts of Covid-19 pandemic since 2019. India has also seen many highs and lows with respect to its economy and the stock market. However, despite all the challenges, the economy was progressing towards the pre-Covid levels.

But, on November 24, 2021, South African researchers shocked the world with the discovery of the new variant i.e. Omicron. This news has sent the stock markets all over the world in a spin. The Indian economy was on the rise after the devastating effects of the first and second wave. However, it is likely to take a hit if the Omicron cases rise sharply.

In this article, we will understand the impacts of the new variant on the stock markets and what the investors need to keep in mind for the future.

Omicron Variant: Impact on the Indian Stock Market

Omicron Variant: Concerns

  • A new variant of Covid-19 emerged recently in South Africa and Botswana. 
  • Presently, there are 236 Omicron cases in India. The PM will hold a review meeting on December 23, 2021.
  • The primary concern with respect to this variant is that it’s more infectious than the other variants and it can apparently evade vaccine protection.
  • However, it is still too early to determine whether Omicron has better or worse symptoms than the previous variants. 
  • Nonetheless, vaccination is essential as it prevents serious symptoms and hospitalisation.

Omicron in India: Impact on the Stock Market

  • Since the news of the Omicron variant, the post pandemic recovery across the world has halted, which has caused some disturbances in the stock market.
  • Due to this, Sensex and Nifty, the main stock market indices witnessed two major falls in the first week of December and on December 20, 2021. Sensex is the 30 stock index of BSE and NIFTY is the 50 stock index of NSE.
  • The new variant could result in a new wave all over the world. This has caused many countries to impose stringent restrictions on travel and public gatherings.
  • The fear of another lockdown due to the new variant could adversely affect the recovery process. Moreover, any lockdown can impact the logistics in the country which can further fuel inflation.
  • Small companies and businesses are still struggling to make ends meet as they are having problems in hiring workers and consumers are still fighting against the rising inflation.
  • Another reason for the sharp collapse is that the Foreign Portfolio Investors (FPIs) have been withdrawing funds from India since the last three months due to the probable rise in the interest rates by the global central banks. In 2021 alone, the FPIs have withdrawn around 47,000 crore from the Indian stock market.

Impact on the Investors

  • The emergence of Omicron variant has put the investors in a difficult position as they are unable to figure out how it will affect the corporate earnings.
  • Investors worry about the likelihood of another countrywide lockdown as the new variant is highly infectious. This would ultimately have an adverse effect on the economy.

What can Investors do?

  • As per analysts, long-term investors should not worry as the Indian stock market will recover soon, just like it did after the first and second wave once the pandemic was under control.
  • At the moment, investors should stick to their original investment plans and not get distracted by the daily market noise.
  • If the stock market slumps, you can buy at lower prices and if it goes up, your money will grow without any hurdles.

RBI’s Stance During Omicron Surge

  • During the last Monetary Policy meeting in December 2021, RBI voted to maintain the status quo.
  • The repo rate has remained constant at 4 percent.
  • It has been decided to maintain an accommodative stance as long as necessary to revive growth.
  • With respect to the growth front, many institutions have started to reduce the growth estimates for the economy. However, RBI has maintained the 9.5% GDP growth estimate for Fiscal 2021-22 in its last monetary policy meeting held in December 2021. 

Conclusion 

To sum up, even though the previous variants have wreaked havoc on the Indian economy and stock market, it is too soon to judge the impact of Omicron variant as it is still very new. The investors are advised to not panic and sell off their solid investments. Rather, they should plan their investments ahead of time and take calculated risks.

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