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Below is the Daily Market Commentary 3rd January 2022 By Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services

Indian equities started the new year 2022 on a strong note with Nifty closing 272 points up (+1.6%) at 17626 levels. Sensex closed 929 points up (+1.6%) at 59183 levels.  Bank Index was up by 940 points (2.65%) and closed at 36422 levels.  Broader market also participated with Nifty Midcap 100 Index up by 1.13% and Nifty Smallcap 100 Index up by 1.15%. Among sectors, all indices (Private Banks, NBFCs, PSU Banks, Metals, Auto Media, Realty, IT and Energy) ended in green except for Pharma which closed negative 0.5%. Volatility index, India VIX closed at 16.45 levels (up 1.42%).

The new year started with the continued uncertainty around the Omicron variant and its rising cases across the globe. Asian markets closed mixed whereas Europe was trading in green. Few Asian markets like Japan, Mainland China were closed. Also the markets in the U.K. and Ireland are closed for the new year holiday. Global markets could be range bound for some time as investors would wait for more clarity on the covid front.

However, we remain optimistic and expect Nifty to deliver around 12-15% returns in 2022, supported by continuation of economic recovery and strong earnings growth. After the recent correction, Nifty is now trading at ~20x 12 month forward PE which is no longer in the expensive zone. 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.    

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