Key risks to equities in 2022

Easing concerns about the potential severity of the Omicron variant lifted world stocks on Tuesday.
According to White House Chief Medical Advisor Dr Anthony Fauci, the initial data regarding the variant was ‘encouraging’, which bolstered confidence of market bulls.
The S&P BSE Sensex vaulted 1,150 points intra-day but ended 886 points higher at 57,634. The Nifty50, meanwhile, ended above the 17,150-mark.
However, caution is the word on the Street as technical indicators suggest volatile phase ahead.
According to tech charts the current volatility has disrupted the positive momentum in the markets, dragging the benchmark Sensex towards the previous reversal mark.
Given this, the index is facing stiff resistance at 59,000 level, while it has a near-term support at 57,000.
As regards Nifty, the index is striving to hold the support of 100-days moving average, which is placed at 17,195. The immediate resistance comes at 17,550 and support stands at 16,600 levels.
In the broader markets, the Nifty MidCap100 and the Nifty SmallCap 100 have managed to hold their support levels. The indices may see up to 5 per cent upside in the near-term.

Fundamentally, this volatility and cautious approach may extend into 2022 as well, as global equities, including India, face multiple headwinds.

For one, analysts say new variants of the Covid -19 infection that make current vaccines less effective is one of the key risks worth flagging.
Secondly, stickier-than-expected inflation could lead to tighter monetary conditions and increase the risk of a policy error.
According to analysts at Morgan Stanley, volatility in Asia’s financial conditions may rise, if and when US 10-year real rates rise sharply in a short span.
That apart, the third risk to equities, according to Street watchers, is lesser room for fiscal stimulus.
This is because governments will likely wind down their unprecedented fiscal policy, and there could also be policy gridlock following the US midterm elections.
Lastly, a slew of initial public offers, especially Life Insurance Corporation  and the National Stock Exchange, may hit the street in 2022, which is another reason why the secondary market liquidity may suffer.

In a nutshell analysts at Motilal Oswal Financial Services expect sectors exposed to markets with rising Covid-19 cases may underperform in 2022.
The brokerage expects sector rotation to continue and defensives like pharma, information technology and consumer to make a comeback till sentiment improves.

As regards today, all eyes will be on the Reserve Bank of India’s bi-monthly monetary policy outcome. Governor Shaktikanta Das will release the policy statement at 10 AM and will address the media later in the day.
If the RBI maintains status quo in policy rates, as widely expected, it would be the ninth consecutive time since the rate remains unchanged.
Given this, rate sensitive stocks such as autos, banks and real estate players will be on investor radar.

That apart, shares of Nykaa, Fino Payments Bank, SJS Enterprises and Policybazaar are also expected to see volatility today as the anchor lock-in is set to unravel from today onwards.

According to analysts, the anchor investor sell-off may keep these stocks under pressure as they have already made money on their investments and will not be willing to hold on for too long.

In the primary market, the initial share sale of RateGain Travel Technologies will enter its second day today.
The company’s three-day IPO has been subscribed less than 50 per cent with retail portion seeing 2x subscription.
Moreover, Shriram Properties will also launch its IPO tomorrow, which will run through Friday. The company aims to Rs 600 crore at a price band of Rs 113-118 a share.