Macro data, Omicron, global trends to guide markets this week: Analysts

Macroeconomic data announcement, Omicron situation and global trends will be the major driving factors for the equity market in the first week of the new year 2022, according to analysts.

In what turned out to be a historic year, the Indian stock indices went past multiple milestones and the 30-share Sensex made an annual gain of 10,502.49 points or 21.99 per cent in 2021.

Religare Broking Vice-President (Research) Ajit Mishra said, "This week marks the beginning of a new month and participants will be closely eyeing some crucial high-frequency data like monthly auto sales, India Manufacturing PMI and India Services PMI. Besides, updates on the COVID-19 situation and performance of global markets will also be critical."

He said that though the markets have been witnessing recovery for the past two weeks, it is too early to say that "we're out of the woods".

"Keeping in mind the mixed indications, participants should maintain a cautious stance and prefer a hedged approach. Almost all sectors are participating in the recovery but we feel banking, pharma, IT and FMCG (fast-moving consumer goods) could outshine others in the coming week," Mishra said.

Siddhartha Khemka, head (retail research) at Motilal Oswal Financial Services Ltd, said markets will start the new year 2022 with its cautious sideways movement as Omicron spreads rapidly both in India and globally.

"However, we remain optimistic and expect the Nifty to deliver around 12-15 per cent returns in 2022, supported by continuation of economic recovery and strong earnings growth.

"While the market trend might be volatile in the near term on account of potential risk from Omicron variant and fragile global cues; in the long run, strong earnings delivery along with positive macro-economic data would hold the key to drive markets upwards," Khemka added.

PMI data for the manufacturing and services sector is scheduled to be announced this week which would also influence the trading sentiment.

"Despite lingering fears surrounding surging Omicron cases, the domestic market is expected to maintain its resilience supported by a healthy long-term growth forecast for the domestic economy.

"The RBI's decision on interest rate hikes will be a major event tracked by the market. We have a constructive positive view on the market for 2022," Vinod Nair, head (research) at Geojit Financial Services, said.

Automobiles companies will also remain in focus on Monday amid monthly sales data announcements.

The year 2021 was rewarding in a big way for equity investors. The 30-share benchmark Sensex soared past the momentous 50,000 and 62,000 levels last year after the pandemic-triggered crash in March 2020.

Nair said that 2021 witnessed a strong recovery amid continuing challenges from subsequent variants of coronavirus to outperform its global peers.

"The strong momentum was bolstered by robust retail participation, economic recovery, vaccine coverage and rising appetite for Indian goods and services.

"The domestic primary market witnessed record fundraising via IPOs (initial public offerings) adding to investor confidence in India's growth story," he added.

Movement of foreign institutional investors (FIIs), Brent crude and rupee will also drive sentiments.