A sharp drop in domestic markets left investors running for cover in Monday’s session as benchmark stock indices fell. The S&P BSE Sensex lost 2,037 points in intraday trading to hit a low of 44,923.08. However, the index partially recovered and ended the day at 45,554 levels, down 3%, or 1,407 points.
On the other hand, the Nifty50 ended the day at 13,328 levels, down 3.14%, or 432 points.
The drop was triggered amid weak global signals and fears of a resurgence of the coronavirus following a new strain in the United Kingdom (UK). Over the last few sessions, the indices have been on a wave of victories, reaching record highs almost daily thanks to the jet of liquidity from foreign investors.
On Monday, the volatility index, India VIX, soared 24.52 percent to 23.19.
“The market did not show resilience to stay above the Nifty 50 level of 13,750. While subject to further price action evolution, technical factors have shifted after today’s sharp correction to support a further correction. in the future. Any downside corrective wave should find support around 12.990-12.960. As such, we advise traders to refrain from building a new buy position until we witness a correction to the 12.990-12.960 level. volatility has expanded in today’s session, indicating earnings reserve and equity distribution at a higher level of the market, “said Ashis Biswas, technical director at CapitalVia Global Research.
These are the key factors behind the current market crash:
Covid fears after new strain of virus: On Saturday, the UK government announced a shutdown in various parts of the country, including London, and said that more than half of all new Covid-19 cases had been caused by a mutated and more infectious strain of coronavirus. . The new strain of the virus is said to be 70% more transmissible. Following this, several countries, including India, imposed travel bans before the Christmas and New Year holiday season.
Market participants are concerned that this new strain of the virus and the ensuing roadblocks and travel bans could hamper the pace of economic recovery.
Weak global signals: The mood at home was also clouded by weak signals from global peers. After trading on a tepid note for most of the session, the selloff in domestic markets accelerated as European equities opened sharply lower.
European stocks tumbled as the rapid spread of a new strain of the coronavirus led to a tighter lockdown in England and a travel ban in many countries, while a Brexit trade deal was still in play, Reuters reported. London’s FTSE lost 2.1%, Germany’s DAX 2.3% and the pan-European STOXX 600 index was down 2.3%. In Asia, Japan’s Nikkei lost 0.40 percent, while US futures were down 0.60 percent, signaling a weak start for Wall Street.
Reserve of benefits: Since November, domestic markets have risen more than 14 percent amid massive liquidity, strong inflows of foreign funds, and development on the vaccine front. However, investors are shying away from taking strong positions in the market in this holiday shortened week and as we approach fiscal year 21 third quarter earnings season.
Apart from that, the lack of interest from active foreign funds is also causing weakness in stocks, analysts say.
“We have entered the Christmas season and therefore the active participation of foreign funds will not be there. This has created a void in the market. Also, investors are highly leveraged and even a small sell in the market has an effect. cascading and that’s what happened today, “said AK Prabhakar, head of research at IDBI Capital.
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