Markets likely to stay volatile

Sensex and Nifty50 would trade on red zone as the investors continue to digest the impact of the new Covid-19 variant as it is vaccine-resistant. On the other hand, FED is talking about fastening the tapper program and likely to bring in rate hikes much faster than expected. Currently, the negative factors outweigh the positive outlook and volatility likely to spurt from current levels.

Sensex & Nifty50 declined as much as by 3% on Friday, following the global market cues. Market participants worry that new variant could bring in lockdowns and which would impact economic growth. Pharma stocks gained on the expectations of robust sale of Covid-19 medicines.

FIIs/FPIs have sold Rs. 135 billion in October 2021 and invested Rs. 14 billion in November 2021 (as of 28^th November). Foreign Institutional Investors (FIIs) Derivative Statistics have shown a rise in the open interest (OI) in stock futures, stock options, index futures and decline in OI for index options.

Wallstreet indices closed in steep red as the investors started to move money to treasury. Covid-19 resurgence in many parts of the world and spread of a newly identified and possibly vaccine-resistant coronavirus variant spooked market participants. Volatility index up by 50% to 27 levels. During the week, Dow Jones down by 2%, Nasdaq slumped by 3.31%, and S&P 500 fell by 2.37%.

US 10-year Treasury fell by 14 bps to 1.49% on Friday as investors rushed to park their money in safe assets.

European markets slid beyond 3% on Friday amid concerns over the new Covid-19 variant spread. Austria and Germany are already tackling skyrocketing Covid-19 cases. The new variant strains were found in UK. During the week, DAX slumped by 5.58% and FTSE declined by 2.50%.

Brent crude prices plummeted by 14% during the week, fifth weekly decline in prices amid surplus supply and concerns over the demand disruption due to new Covid-19 variant. OPEC�s advisory board expects a 400,000 barrels per day excess in the oil markets in December 2021 and predicted that the surplus would expand to 2.3 million bdp in January 2022 and 3.7 million bdp in February 2022 if consumer nations proceed with the release.

Gold prices fell by 3.5% during the week amid slight easing inflation expectation.

Global Economy

From the FED policy-meeting minutes, FED policymakers noted the central bank should be prepared to adjust the pace of asset purchases and raise interest rates sooner than anticipated if inflation continued to run high, while acknowledging that the path of the economy continued to depend on the course of the virus.

US crude oil inventories rose 1.017 million barrels in the week ending 19^th November 2021, after a 2.101 million drop in the previous period and compared with market forecasts of 0.481 million decrease, data from the EIA Petroleum Status Report showed.

The number of Americans filing new claims for unemployment benefits dropped to 199,000 in the week ending 20^th November 2021, from a revised 270,000 in the previous period and well below market expectations of 260,000.

Corporate profits in the United States rose 4.3% to a fresh record high of USD 2.54 trillion in the third quarter 2021, slowing from a 10.5% jump in the previous period.

From the ECB policy-meeting minutes, ECB policymakers indicated that the very generous monetary policy support to the economy would need to be reassessed at some point in the future in view of the improved inflation outlook, and be brought towards a more neutral configuration over time.

Profits earned by China's industrial firms increased by 42.2% (Y-o-Y) to CNY 7.16 trillion in January-October 2021, after a 44.7% surge in the prior period and slowing for the 8th straight month, amid moderation in recovery momentum.