Correction Looms for India Stocks as Omicron Spurs Asia Rout
(Bloomberg) -- India’s key equities guage entered into correction zone as concerns about risks from the rapid spread of the omicron coronavirus variant prompted selling of equities ahead of year-end holidays.
Tata Steel Ltd. was among the biggest drags on the NSE Nifty 50 Index, which retreated 2.2% to 16,614.20 in Mumbai, to post its biggest two-day decline since April 12. The benchmark S&P BSE Sensex fell 2.1%, with all but two of its 30 members declining. The Nifty has entered technical correction, falling more than 10% from its record high closing level on October 18, while the Sensex is little short.
“Markets are under tremendous pressure, a further 5%-6% decline is possible for the benchmark,” said Vishal Wagh, head of research at Bonanza Portfolio Ltd.
Stocks tumbled across the region as concerns that a return of stricter curbs to control the spread of the new variant may hurt nascent economic recoveries weighed on investor sentiment.
The benchmark Sensex rose more than 20% in the first 10 months of this year, aided by the central bank’s efforts to pump funds into the economy and steady buying by millions of first-time investors. The measure’s gain of over 110% from a March 2020 low -- when stocks plunged worldwide as the coronavirus spread -- is the most among countries with stock markets worth at least $1 trillion.
In recent weeks, brokerages including Goldman Sachs Group Inc. and Nomura Holdings Inc. have lowered their outlook for Indian equities, flagging pricey valuations. The Sensex trades at 21 times estimated forward 12-month profits, compared with about 12 times for the MSCI Emerging Markets Index. Foreign investors sold about $1.1 billion dollars in Indian shares this month through December 16.
Read: India’s Nifty 50 May Have More Room to Fall, Chart Shows
“All things seem to be coming together for Indian markets, from tax-loss harvesting by the foreign investors to global volatility and the impact of virus spread,” said Vikas Gupta, a strategist at Omniscience Capital Advisors Pvt. He expects volatility to persist in Indian markets for next few weeks as fund managers look to reset portfolios and book profit ahead of the new year.
S&P BSE Small Cap Index fell 3.3%, the most since April 12. All 19 BSE-managed sub-gauges declined, with realty and oil & gas stocks the worst performing groups falling 4.7% and 3.8%, respectively.
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