Will Covid fears affect the market once again?

date 23  December,  2022
time 3 mins read

Indian Markets are now again under the grip of the bears this week after a spectacular and outperforming rally from a couple of months thanks to the return of the covid fears on the street. The multiplying corona cases in China and the Bank of Japan’s decision to keep interest rates elevated for a longer period added to the ongoing bearish sentiments in the Indian market.

China has been a factor of concern for the Indian markets since the first Tawang clash between Indian and Chinese soldiers has kept the market on its toes and now the return of corona with a new variant is now showering dark clouds above the markets.

 Since 2019, China and the whole world are facing corona crisis followed by its ripple effects on the economy the world. The Chinese government has put a Zero Covid-19 policy by doing massive and aggressive measures of testing and quarantines in the country. The Chinese government has removed major restrictions amid huge protests in the country over the corona policy which has, in turn, turned out to be a disaster at the current juncture.

 The daily corona cases have been on a steep rise in the past few weeks in Chinese territory and now the same is seen in the US, Japan, Korea, and some other countries all over the world. This has triggered a fresh round of panic in the financial markets, especially in India.

*Reasons why the Rising Corona Crisis in China is a concern:*

  1. Supply Chain issue as China plays a vital role in the global connectivity for many goods
  2. China is the largest consumer of many commodities and Oil which may trigger a sell-off in the commodities market.
  3. Panic situations all over the globe
  4. The global economy may face jitters

*Why Indian Markets are under panic mode:*

  1. The index was around at all-time highs
  2. It has been a major outperformer in the last few months
  3. The mid and small-caps stocks also gained heavily in the recent past
  4. Emerging markets likely see outflows during uncertainty.

Do investors need to panic in these times:

The news of the covid fears came all of a sudden in the markets where the index was nearing all-time highs and the participants were having long positions in the index. On the other hand, any unexpected news will trigger a massive sell-off in any financial market and the same has happened in the Indian markets as well.

It has been three years now since India in handling the covid management and we are now well prepared to deal with any kind of uncertain events. From the financial point of view, there might be some volatility in the near-term period. Still, the overall bullish movement is likely to re-emerge as we approach the New calendar year and the most important pre-budget movements.

There is no need for any panic at the current juncture of the long-term investors in the Indian markets. As a country, we are well prepared to handle any kind of situation in the coming months. On the other hand, financial markets have also handled the covid situation in the last couple of years and may adjust to the upcoming covid fears. The only exception is any major news outbreak which no one can guess at the current juncture while may spoil the market sentiments.

Indian equity markets are expected to remain volatile as per the news flows but the undertone may remain good from an investment perspective as major of the negative sentiments have already been factored in. Investors may start accumulating the stocks available at the good correction and are backed by solid fundamentals and earnings growth. On the other hand, new investors may opt for the route of SIP or mutual funds and start riding the investment journey.

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