Stock Market & Omicron: Know the impact of COVID-19 third wave on the stock market

January 11, 2022 Trading 3 min read
omicron and stock market

Introduction: 2021 witnessed slow progress towards normalization post the havoc created by COVID-19. This featured one of the lowest positive cases recorded in a single day and people going about their usual activities as if COVID-19 was a thing of the past.

However, in November 2021, a new variant of the virus – Omicron was reported from South Africa. With cases now rising again, India along with the other nations have resumed their preventive measures once again.

Currently, the stock market has not been impacted due to the new variant. The Sensex has been witnessing a steady growth. The only notable impact to be seen was the 1% correction on 6th January due to the hawkish monetary policy stance indicated by the US Federal Open Market Committee.

However, this was not always the case. In 2022 and 2021, the stock market reacted to the restrictions and rising cases of COVID-19 patients.

Let us just take a moment and lookback of how the pandemic has affected the Indian stock market.

  • In mid January 2020, the BSE was at 42,273 points, in the first week of April it fell to 29,894 points.
  • The Earnings Ratio of Sensex has traditionally been 20-24. However, by the end of March 2020 it went down to 17.81.
  • The mid-cap index reduced by 26% and the Sensex dipped by 22% for the Financial year 2020
  • In 2020, 10 million demat accounts were opened due to the surge in online trading and low cost of trades.
  • On May 6th 2021, the Sensex fell to 48,253 from 51,279 on March 10th 2021.

Experts are now predicting Omicron’s impact on the stock market in India. Let us explore this topic in detail below.

Current scheme: The emergence of Omicron has put a brake on the economic development post the pandemic and its impact is visible in the stock markets as well. Some weeks back, Nifty and Sensex witnessed two significant collapses leaving all stakeholders unsettled. 

The industries that have been severely hit are the hospitality sector, airlines, real estate, automobile, and manufacturing. This has been the case due to the restrictions and protocols imposed by the respective state governments, reduced number of travelers as people are worried that they may be infected, and with the overall cases rising.

Confusion led volatility:

The various stakeholders of the market are in an unwanted position where they are waiting and observing the relationship between the share market and omicron. 

This has led to a sense of confusion and volatility. Experts are still waiting for the effect of the virus on the stock market.

Sell or Wait: Investors in such situations have the urge to sell their equity investments and keep the cash close to their chest. However, there is also a probability that if the stock market clears the hurdles and rises, investors will be left with losses. 

On the other hand, SIP investors will be tempted to stop their SIP instalments temporarily. However, if the market acts bullish, SIP investors will be obliged to purchase mutual funds or equities at a much higher rate.

Whatever may be the cause and effect between omicron and stock market, it has everyone on the edges of their seats/

What can an investor do right now? 

As the market becomes volatile, as an investor the first thing that you can do is not to panic. The volatility of the market is obvious during a situation such as these, as long as you have invested in companies that have not witnessed severe damage to their business model.

One can also opt for high-quality companies to invest in and hold onto them if that suits their investment agenda. Some experts feel the best strategy is not to take any action if your money has been invested in high-quality organizations. This will give you the confidence that the stock might eventually recover once the market bounces back. You cannot be reacting to the stock market’s changes as per your emotions. It is always better to consult an expert before making any knee-jerk reaction.

Furthermore, it is always advised to diversify your portfolio. This will help you tackle any volatility and minimize your losses.

Takeaway: The relationship between Omicron and stock market 2022 is going to reveal its true colours in the time to come. Currently, it would be too early to pinpoint the effects of the virus on the stock market.


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