Domestic stock markets have witnessed a spike in volatility over the past few trading sessions as investors remain worried about the overall impact of the Omicron variant of coronavirus.

Both S&P BSE Sensex and NSE Nifty 50 went through two big crashes last week, following reports that the new coronavirus variant is spreading rapidly across countries. This has led to some countries imposing fresh restrictions as scientists have classified the new variant as highly transmissible.

Market experts are worried that hasty decisions taken by countries to prevent the spread of the new Covid variant could ultimately end up hurting global economic recovery and markets. This, in turn, could have a damaging effect on the Indian stock markets as well.

Read | Sensex, Nifty rise on strong Q2FY22 GDP growth

STOCK MARKET CORRECTION LIKELY

Experts tracking the stock market recently predicted domestic stocks to correct further as Omicron has added to existing issues such as higher inflationary pressure, possible hike in interest rates and global supply disruptions.

While benchmark indices Sensex and Nifty rose on Wednesday after the country reported strong growth in the second quarter, markets remain highly volatile at the moment.

A poll of strategists, conducted by news agency Reuters, indicated that domestic equities will not recover from recent losses until after mid-2022. This is due to concerns over Covid-19 resurgence and global monetary tightening. Further corrections can also be expected in the next six months.

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However, it is too early to predict how the new Covid-19 variant will impact the global economy. As scientists around the world try decoding the new variants, market experts have asked investors to exercise caution while placing new bets and avoid any panic-driven decisions.

EXPERTS ON FUTURE MARKET MOVEMENT

The Indian stock market has made a remarkable recovery following the two previous waves of Covid-19, with Sensex rallying nearly 20% year-to-date (YTD). However, the index has dropped around 8 per cent from its all-time high of 62,245.43 amid rising concern over the new Covid-19 variant.

The poll of 35 equity strategists suggested that the benchmark Sensex will again touch 60,450 by mid-2022, up over 5 per cent from Monday’s close of 57,260.58.

“We believe the inflation fear combined with the rise in Covid-19 cases globally may continue to trigger corrective moves in the following months,” said Ajit Mishra, VP Research, Religare Broking to Reuters.

However, the index is expected to rise and hit a high of 63,000 by the end of 2022. At least 25 of the 35 equity strategists polled by Reuters said a correction in Indian equities is likely over the next six months.

“We could see a 5-10% correction for Indian markets as valuations adjust to the moderation in earnings momentum. The market also remains sensitive to risk for EM equities from the strong (U.S.) dollar and higher bond yields,” said Rajat Agarwal, Asia equity strategist at Societe Generale.