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Below is the Daily Market Commentary 06 January 2022 By Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services

Domestic indices opened gap down and witnessed selling pressure in line with its global peers. Rising covid cases and stricter restrictions being imposed too contributed to the negative sentiments in the market. Nifty, dismissed its four day winning streak and ended the day with loss of 179 points (-1%) at 17,746 levels. However, broader market closed in green with minor gains of 0.2%. Among sectors, auto, media, PSU Bank, and consumer durables ended in green. While IT and Realty indices were down 1% each, followed by financial services, FMCG, pharma and metals.

Global markets witnessed sell off after minutes from the Federal Reserve’s meeting pointed to a faster-than-expected rise in interest rates due to concerns about persistent inflation.

As we step into CY22, the focus of central bankers across the world has shifted towards inflation and monetary policy normalization post the pandemic given the context of US Fed Tapering and potential hardening of interest rates in CY22. Meanwhile, the third COVID wave has once again resulted in imposition of some state-level restrictions. While this wave, so far, seems less severe in terms of mortality and hospitalization, one needs to watch out for the trend and reactions of both the state and central governments in the next few weeks.

While the market trend might be volatile in the near term on account of potential risk from Omicron variant, upcoming budget and fragile global cues, in the long run, strong earnings delivery along with positive macro-economic data would hold the key to drive markets. We remain optimistic and expect Nifty to deliver around 12-15% returns in 2022, supported by continuation of economic recovery and strong earnings growth.

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