In Monday’s trading session, the National Stock Exchange’s flagship index Nifty50 fell by more than 280 points whereas Bombay Stock Exchange’s Sensex went down by almost 950 points, giving chills down the spine of investors and traders. Both the indices marked a fall by 1.65% each.
The charts made one side momentum on the downward trajectory in continuation to Friday’s bearish session. Nifty50 has lost around 600 points in the last week after the news of Omicron cases in India broke out.
Summary of the Trading Session
The Nifty50 index opened at 17,209 and made an immediate high of 17,216 from where it started slipping down making a low of 16,892, breaking all the supports along the way. It closed at 16,912 at the end of the trading session.
Similarly, the Sensex opened at 57,778. Marking the open as high, BSE’s flagship index saw a sell-off from the very first minute and made a low of 56,688. Sensex closed at 56,745, slightly above the day’s low at the end, losing almost a thousand points since the previous trading session.
The Asian peers also remained under pressure throughout the trading session. Hang Seng was down by 1.75%, Shanghai Composite by 0.5%, Nikkei by 0.36%, and Kospi by 0.17%.
India VIX, which hit a high of 20.08 on Monday, has raised concerns among investors. This jump in the volatility index indicates chances of upcoming correction in the future as investors are getting panicked with each downfall.
Upcoming RBI’s Policy Review
On Wednesday, the Reserve Bank of India is reviewing the monetary policy. The investors seem to be booking profits ahead of the policy meet and due to the Omicron spread which could potentially disrupt the economy.
Considering these factors, the volatility in the markets might remain in the coming sessions until the obscurity remains. The Federal Reserve’s policy meeting will also add up to the volatility.
The Dalal Street expectations from the central bank is that the accommodative stance adopted by them owing to the pandemic must continue to be held for another quarter as the vagueness related to the virus continues to scare the investors.
The RBI policy review is widely expected to keep key interest rates on hold amid uncertainties over the impact of a novel coronavirus outbreak on the economy.
The new variant is spreading briskly across the nation with the highest number of cases reported in Maharashtra so far. Reportedly, a total of 21 cases of the new variant has been found in India.
Foreign investors are worried about the potential impact of the US Federal Reserve’s plans to reduce its massive bond purchases. This has led to the outflow of funds from Indian shares.
Since October, India has lost $3.4 billion worth of foreign exchange (FII) money. This is a warning sign that markets may not see robust liquidity flow.
Policymakers in Asia will gradually normalize policies, depending on the pace of recovery and inflation dynamics. However, since the US 10-year real rate is expected to rise sharply, this could create volatility in the financial markets.
What is Omicron?
Omicron is a variant of COVID-19 that has several mutations that may affect how it behaves. There is also uncertainty regarding its transmissibility and its potential reinfection risk. The WHO has detected the Omicron variant in several countries. It is believed that this variant could spread globally.
What is the relevance of the RBI’s Monetary Policy?
The monetary policy aims to establish a uniform level of interest rates, credit availability, and money supply in India. It is carried out by the Reserve Bank of India. It is conducted every quarter with a minimum of four members with independent voting rights. The Monetary Policy meeting is conducted as per the provision of the Reserve Bank of India Act, 1934.
What does India VIX indicate?
India VIX stands for India Volatility Index. It indicates how volatile the index can be in the next 30 trading sessions. The purpose behind it is to alarm the traders of the upcoming major swings. Typically, whenever there is a situation of panic in the market, India VIX goes up which is an alarming factor.