Covid cases are witnessing a sharp rise in China and some parts of Western Europe yet again, primarily driven by the Omicron variant of the virus.
A Reuters report suggested new Covid cases in China more than doubled on March 15 from a day earlier to hit a two-year high.
A sharp jump in Covid cases has forced authorities to announce lockdowns in some parts of the country and the spread now has started to raise concerns over the economic fallout of measures announced to contain the disease.
However, the fresh surge of the virus does not seem to have affected the market sentiment as China's Shanghai Composite index jumped about 3.5 percent while Hang Seng surged more than 9 percent. Hang Seng is a stock market index in Hong Kong that is now witnessing a sharp rise in Covid-19 cases. Hong Kong is not just witnessing a rise in cases, it is also breaking records for deaths, losing 35 per 1 million people to Covid-19.
The Indian market is also up with gains of over a percent, tracking its global peers.
"We expect the minimal impact of rising Covid cases in China and Europe on Indian equities as many fundamental parameters are far better for India. Moreover, India has well managed all Covid waves tactfully compared to most other nations," Mitul Shah, Head of Research at Reliance Securities, said.
Other than the ongoing Russia-Ukraine war and inflation, India appears to be in a good shape, giving hope that the market will give healthy returns in the medium to long term.
"We expect outperformance of Indian equities against global to continue in the near term. The Indian economy is in good shape given the underlying stellar corporate earnings momentum, the cleansed balance sheets, improving asset quality of the banks, levers in place for capex cycle revival and credit off-take, probable manufacturing resurgence given PLI and other government reforms. This coupled with increasing DII participation can boost the markets to new heights once prevailing clouds of uncertainty disappear," said Shah.
The market is ignoring rising Covid cases in China and some parts of Europe for the time being as the Russia-Ukraine issue and FOMC meeting outcome are the key driving factors for the market.
However, rising covid cases may hurt sentiment if the situation deteriorates from here.
"Lockdown in China may cause a slowdown in the global economy, however, fall in crude oil prices due to a slowdown in China may act as a tailwind for the Indian equity market in the near term. I believe the worst is behind us in terms of the Russia-Ukraine war whereas the market is prepared for a rate hike in the US therefore market may start to rally from here after more than four months of correction if the Covid situation doesn't deteriorate," said Santosh Meena, Head of Research, Swastika Investmart.
Arun Malhotra, Founding Partner and Portfolio Manager at CapGrow Capital Advisors underscored that the threat of the pandemic still looms because the virus will continue to mutate and because of this, transmission across the globe will fall and rise.
"There are two ways for protection - vaccination or natural immunity. For natural immunity to happen, waves will reoccur and a new wave will ensure higher vaccinations. But it’s getting harder and harder to know what one country’s pattern means for another country. The nationwide implications will be very different depending on vaccine coverage and mitigation measures. The capital markets will not see a bottomless fall similar to March 2020, as they are much better informed and expect lockdowns to be temporary," said Malhotra.
