The stock market came under heavy selling pressure in the last hour of Monday’s session, with benchmark indices falling more than 2 percent. The volatility index, India VIX, rose 13 percent to levels of 22.6, indicating greater volatility in the market. The S&P BSE Sensex fell 812 points to nearly 38,034 levels, while the NSE’s Nifty fell below the crucial 11,300 mark, down 254 points, or about 2.2 percent, to end the session at 11,251 levels.
So what dragged the markets down on Monday?
Weak global signals: The fall in top Indian indices was in line with their world peers. Asian stocks fell on Monday on concerns about global economic growth due to the resurgence of coronavirus infections in Europe. Other than that, fading hopes of US fiscal stimulus also weighed on investor sentiment. European stocks fell to two-week lows, while S&P 500 e-minis fell 0.6 percent, pointing to a weak start for Wall Street on Monday. Most of the major Asian indices were in the red and MSCI’s broader Asia-Pacific equity index outside of Japan was 0.6 percent weaker at 565.75, according to a Reuters report.
In addition, nervousness ahead of the US elections also affected investor sentiment, analysts say. The 2020 US presidential election is scheduled for Tuesday, November 3, 2020. “History shows that the market has always corrected and remained very volatile ahead of the US election,” said Sudip Bandyopadhyay, president. of the Inditrade Capital group.
Increase in Covid-19 Cases: With 86,961 new coronavirus cases and 1,130 deaths in 24 hours, India’s Covid-19 count on Monday approached 55 lakh-mark with a total of 54,87,580 cases in 235 days since the first case was reported. January 30. second most affected behind the US, which has 679,9044 cases and 1,99,474 deaths. READ MORE
Bank stocks fall on FinCEN’s files: Between 2010 and 2017, several Indian banks helped facilitate transactions flagged by the Treasury Department’s Financial Crime Enforcement Network (FinCEN) for alleged money laundering, terrorism, drug trafficking and financial fraud, the latest leaks suggest. According to the leaks, Indian banks received $ 482,181,226 from outside the country and transferred $ 406,278 from India, well 962. These transactions were red flagged to US authorities.
Among Nifty Bank constituents, IndusInd Bank fell 8.3 percent to hit an intraday low of Rs 562 per share. Additionally, Bandhan Bank sank 7%, RNL Bank (6.6%), Punjab National Bank (5.6%) and IDFC First Bank (6.4%). READ MORE HERE
F&O expiration: Traders also posted pre-expiration earnings on futures and options (F&O) contracts for the September series that expire on Thursday, September 24. Most analysts expect the markets to remain volatile as traders renew or balance their positions. “Given that the market rallied around 50 percent from March lows, some correction had to be made, which has come ahead of the F&O maturity now. Valuations also look quite stretched and therefore a correction was in the offing. There is not much to worry about as it is a healthy correction, ”said Bandyopadhyay.
Right size and small cap: The sell-off in the overall market was more severe as the S&P BSE SmallCap and S&P BSE MidCap indices fell about 3.5 percent each to 14,747 levels and 14,532 levels, respectively. Both indices have recovered during the last sessions. Last week, the BSE SmallCap Index posted its biggest single-day gain in more than five months and hit a 52-week high. The recovery was triggered by the decision of the Securities and Exchange Board of India (Sebi) to modify the rules governing multi-capitalization funds. Nervousness and strong sell-off in these two market segments also created nervousness in the large-cap basket, which was already poised for a correction.
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