Omicron: All about new Covid-19 variant and how it may impact market movement

The Covid-19 pandemic is not over yet and the virus could be back with a vengeance, potentially again forcing the world indoors, and businesses to shut shop for weeks, if not months, on end.

Just days after saying that the new Omicron strain was a “variant of concern” the World Health Organization (WHO) has said it poses a “very high” global risk and could have “severe consequences” where there are surges.

Do we yet know how contagious the new variant really is?

The WHO says we don’t yet know how contagious the new variant really is. But several experts across the world have said that it spreads significantly faster than the Delta variant, which originated in India and spread across most of the world, becoming the fastest spreading variant till Omicron was discovered this month in southern Africa.

What else has the WHO said?

The global health body has said that the new variant could spread internationally and that countries should increase vaccination rates and put mitigation measures in place.

“Omicron has an unprecedented number of spike mutations, some of which are concerning for their potential impact on the trajectory of the pandemic,” the WHO said. “If another major surge of Covid-19 takes place driven by Omicron, consequences may be severe,” the health agency said in a technical note.

Which countries have put travel bans in place?

So far, at least two countries—Israel and Japan—have banned people from coming, except their own citizens.

Most countries have not yet imposed blanket bans on travellers. However, several of them have banned travellers from South Africa and other affected countries from coming in.

What has India done so far?

India will make on-arrival testing mandatory for those arriving from countries where ‘Omicron’ has been found, NDTV said in a report. Every international passenger coming to India has to fill a self-declaration form and show a negative RT-PCR test report. They can’t enter India if any of these two conditions are not fulfilled, the report added.

How have the Indian and global stock markets reacted to the news of the new variant?

Global equity markets, including India, have seen a sharp sell-off over the past few sessions as the Omicron variant reignited concerns of sporadic lockdowns and limit movement of goods and people across key economies.

The Nifty50 plunged 738.35 points, or 4.16%, to 17,026.45 last week, slipping to its lowest since August 30. The BSE Sensex slumped 2,528.86 points, or 4.24%, at 57,107.15.

On Monday, though, the markets recovered a bit and the Sensex and the Nifty ended in the green, although the markets were choppy.

In India, several sectoral stocks including those in the travel and tourism sector, hotels and other related sectors, have been under pressure.

What do analysts say about the markets in the wake of the new variant?

Analysts cited by Moneycontrol say that nervousness is likely to continue this week as well, with the focus on severity of the new strain, monthly auto sales numbers, second-quarter GDP data and foreign investment flows.

“Investors appear to be booking profits in high-beta sectors and shifting their portfolio to defensive sectors like FMCG and IT. We expect the market to maintain its corrective phase for the next few trading sessions and therefore making fresh longs is not advisable,” said Likhita Chepa, senior research analyst at CapitalVia Global Research.

Deepak Jasani, head of retail research at HDFC Securities, said that even if the latest threat turns out to be overblown, the upside could still be limited and markets could again react negatively to some other emerging development. “Sell into rallies could be witnessed for some weeks to come,” he said.

Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services, said that the market is likely to remain under pressure until clarity emerges over how dangerous this new variant can be. “The market is already watchful of the timing of the Fed’s interest rate hike,” he said.