Sensex: Why sensex, Nifty fell to 7-month low; what should investors do | Business – Times of India
The 30-share BSE index tumbled 1,688 points or 2.87 per cent to close at 57,107; while the broader NSE Nifty settled 510 points or 2.91 per cent lower at 17,026.
IndusInd bank was the top loser in the sensex pack falling as much as 6.01 per cent followed by Maruti, Tata Steel, NTPC, Bajaj Finance, HDFC were the other losers.
On the NSE platform, sub-indices Nifty Realty, Metal, PSU Bank, and Auto fell as much as 6.26 per cent.
Here are the top reasons behind today’s fall:
* New Covid variant
Investors dumped risky assets after a new and possibly vaccine-resistant coronavirus variant was identified in South Africa.
Even though not much is known about the variant yet, but it has been detected in South Africa, Botswana, Israel and Hong Kong so far.
Scientists are of the view that the variant has an unusual combination of mutations, may be able to evade immune responses and could be more transmissible.
“There is a fear of this new variant spreading to other countries which might again derail the global economy,” Hemang Jani, equity strategist at Motilal Oswal Financial Services told news agency Reuters.
* Fresh lockdowns and restrictions
Some European countries have already tightened anti-virus controls this week after their own case numbers spiked. Austria imposed a 10-day lockdown, while Italy restricted activity by unvaccinated people.
The United States has already advised people to avoid Germany and Denmark.
The 27-nation EU proposed the travel suspension to member governments after South Africa said the variant was spreading in its most populous province.
The United Kingdom also banned flights from South Africa and five nearby countries.
* Negative trends in global markets
Global stocks tumbled on Friday and oil fell below $80 a barrel.
European stocks plunged 2.7 per cent, on track for their worst day since September 2020, with travel and leisure stocks particularly badly hit.
Germany’s DAX sank 3 per cent and Britain’s FTSE 100 fell 2.7 per cent to its lowest in more than a month.
MSCI’s index of Asian shares outside Japan fell 2.2 per cent, its sharpest drop since August. Casino and beverage shares were hammered in Hong Kong, while travel stocks dropped in Sydney and Tokyo.
Japan’s Nikkei skidded 2.5 per cent and S&P 500 futures were last down 1.8 per cent.
Oil prices slid, with US crude futures down 5.7 per cent to $73.96 a barrel and Brent crude down 4.66 per cent to $78.38 amid fresh demand fears.
* Foreign fund outflows for 7 days straight
Foreign institutional investors (FIIs) have been consistently withdrawing funds from Indian markets since the past 7 sessions.
On Thursday as well, FIIs were net seller in the capital market, as they offloaded shares worth Rs 2,300.65 crore, exchange data showed.
“Sustained selling by FIIs for the seventh consecutive day is a major sentiment negative for the market,” VK Vijayakumar, Chief investment Strategist at Geojit Financial Services told news agency PTI.
* Concerns over rising inflation
At the October policy review meeting, officials of the US Federal Reserve said that they “would not hesitate” to respond to inflation.
They also foresaw the possibility of raising rates “sooner than participants currently anticipated.”
That fueled investor fears the Fed and other central banks might feel pressure to withdraw economic stimulus that has been boosting stock prices. Fed officials earlier indicated they might raise rates late next year.
How much is the fall?
Both sensex and Nifty were experiencing a stellar run since last year and scaling fresh record highs in almost every session.
The BSE sensex hit its last record high of 62,245 on October 19. Since then, it has plunged over 5,000 points or over 8 per cent till today’s closing of 57,107.
In fact this is the 2nd time in this week itself that the stock markets have witnessed a crash of over 1,000 points. On November 22 (Monday), the indices had plunged nearly 2 per cent with the sensex closing at 58,466.
In all if we see, markets saw sharp correction this week amid renewed concerns pertaining to Covid-19.
Markets saw sharp correction this week amid renewed concerns pertaining to Covid-19. Sensex declined 3,181 points or 4 per cent in total during this week. The broader Nifty also declined 4 per cent.
Today’s crash — being the worst in 7 months — has made investors poorer by Rs 7.35 lakh core. The market valuation of all BSE-listed companies stood at Rs 2,58,31,172.25 crore.
What should investors do?
The new Covid variant is sure a cause of concern for investors globally as initial reports suggest that it may have the potential to hamper the process of economic recovery made by the countries.
However, India has not yet raised any alarm over the situation as nothing much is known yet about the virus. But, it will continue to screen passengers arriving from certain countries diligently.
As of now, investors should not be much worried about the situation. But, experts do expect markets to remain under some pressure during the short run. Though, it may improve in the medium to long run.
If we look at the past trends, we can see that even during the second wave of Covid in India during April-June, there was not much impact on the bourses.
In fact, stock markets have remained in the upward trajectory ever since the massive pandemic-induced fall in March 2020 when the entire world went into lockdown. Since then, stock markets have been one of the most favoured medium for investment.
Besides, India’s fundamentals have been pretty strong since the past couple of quarters. Its gross domestic product (GDP) growth in Q1 was the best ever recorded for the country, owing to low base effect. If recent trends are to be seen, almost all major indicators points towards a sharp recovery.
The economy expanded by 1.6 per cent and 20.1 per cent in the January-March and April-June quarters, respectively.
(With inputs from agencies)
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