Cautious attitude in global equity markets to welcome the new year 2022

- Higher-than-expected inflation rates could prompt global central banks to tighten lending policy ahead of time

The new variant of the deadly epidemic Kovid-18 Omikro has once again created an atmosphere of terror in the global economy. In addition, rising inflation and liquidity crises have added fuel to the fire. In the calendar year 2021, the benchmark BSE Sensex and the NSE Nifty of the Indian stock market have seen a sharp rise of 20 to 5 per cent. Meanwhile, global equity markets, including India, appear to be on high alert to welcome the new calendar year 207.

The main risk, market analysts say, is that the existing vaccine is less effective for a new variant of the Covid-12 transition, Omicron. Rising inflation is also a threat to the asset class in 2021, even though many brokers-traders believe that the current high inflation rate is temporary. However, volatility relative to projected inflation rates could prompt the world's central banks to tighten monetary policy and increase the risk of policy deficits. Both of the above factors will be negative for global equity markets.

In addition, there may be less room for future financial relief, which has been instrumental in equities during the Covid-12 crisis. This is because the government may end its simple monetary policy and fears of a sharp rise in interest rates by the Federal Reserve in the United States are growing.

According to Morgan Stanley, policy makers in Asia will be able to gradually normalize monetary policy based on the pace of recovery rather than the federal policy stance.

"There is a risk that if the US Federal Reserve raises interest rates too quickly in the short term, it could destabilize Asia's financial position, although we believe that the impact will be less than in 2015," said economist Morgan Stanley in a report. If these clouds of danger are removed, we expect India and Indonesia to emerge as a clearer and more capable economy.

Growth in corporate earnings can also be risky in the face of rising production costs and wage rates. Another related risk is disruption in the supply chain, as major global economies have resorted to lockdown measures to avoid the transition to the Covid-12, putting pressure on the profits of some companies in the second half of 2021.

Of course, many analysts agree that the future path for equity as an asset class will be uncertain given the current problems, but they believe that the focus of the market in 203 will be on growth in the corporate body.