Nifty and Sensex have fallen over 2.5 percent so far this week. The fall in equity markets doesn’t come as a surprise with these concerns in sight:
- Fears mounting over the new omicron covid variant
- US Fed’s decision to cut it’s liquidity program by March next year along with three rate hikes planned in 2022
- Continuous sell-off by Foreign Institutional Investors (FII)
Four major nations viz. US, UK, France and Germany are seeing sharp resurgence in the number of daily new cases. Infact UK and France are witnessing higher cases than seen in the previous waves. While the effect of the new variant hasn’t been that visible in India, yet, the markets may be factoring in the risks.
Meanwhile, rising inflationary pressures and decreasing unemployment has triggered the US Fed to cut its liquidity infusing program by March, it has also announced that it could go ahead with as many as three interest rate hikes in 2022. Structurally, a rising interest rate scenario doesn’t favor equity markets.
Finally, thanks to the rising US Dollar rates, rising inflations/interest rate risks, and an IPO rush indicating frothy valuations in certain sectors have also triggered a continuous sell-off by Foreign Institutional Investors (FII). FIIs have been net sellers through October and November ‘21. In December, they had already sold assets worth ₹24,600 crore.
Amidst this, investors are seeking refuge in the IT sector stocks. On Friday, December 17, even as all Nifty sectoral indices were trading in red, the IT sector was up over 1.5 percent. The sector has benefited from the tailwind of strong demand for cloud and security services. Further, global IT giant Accenture’s strong quarterly results add to the investor confidence. Accenture also upgraded its revenue growth estimate to 19-22 percent from 12-15 percent for fiscal 2022.
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