Sensex slumps 800 points, ₹4 lakh crore wiped out. Why markets tanked today?
Investors lost more than ₹4 lakh crore today as Indian markets fell sharply. Rising coronavirus cases at home and abroad dented investor sentiment. The broader NSE Nifty 50 index fell about 2.5% to 11,222 while the benchmark S&P BSE Sensex tanked over 800 points to 38,034. Global markets fell as some European countries such as Denmark, Greece and Spain imposed restrictions on activity due to rising COVID-19 cases, which threatened to stall recovery.
The Nifty banking index, which tracks both state-owned and private-sector lenders, fell for a third straight session to end 3.3% lower. Among the Sensex stocks, IndusInd Bank was the biggest loser and slumped over 8% while Maruti, M&M, ICICI Bank, Tata Steel and Bharti Airtel fell between 5% and 6%
Analysts say that global market sentiment took a knock as a resurgence of coronavirus infections in Europe dimmed hopes of a quick global economic recovery. Fading hopes for U.S. fiscal stimulus hopes also weighed. Hong Kong-listed shares of Standard Chartered and HSBC tumbled today, following reports that they allegedly moved large sums of suspicious funds.
Here are some key triggers for today's sharp fall, according to analysts:
1) "Indian equity benchmark indices ended the first day of the week with deep cuts, in-line with the soft global sentiments. Nifty fell almost one way post 12:15 pm after European markets opened with deep cuts," said Deepak Jasani, Head of Retail Research, HDFC Securities.
"Traders were quick to unwind their long positions fearing further weakness. Volumes on the NSE were above recent average."
2) "The markets have broken the support of 11300 on a closing basis and this is definitely an alarming situation. We could drop to 10950-11000 levels as the fall today has been fierce and on the back of good volumes. The resistance on the upside is at 11550-11600. Until then the markets look weak," said Manish Hathiramani, Proprietary Index Trader and Technical Analyst, Deen Dayal Investments.
3) "We feel the rising COVID-19 cases combined with the correction in the US markets spooked the investors and it may deteriorate further if Nifty slips below 11,200. The next major support would come close to 10,800 zone. Since we’re in the expiry week, traders should be more cautious and we suggest preferring hedged positions. Investors, on the other hand, should use this fall as an opportunity and gradually accumulate quality stocks," said Ajit Mishra, VP - Research, Religare Broking.
4) "Indian benchmark indices succumbed to profit booking in the second half of the trading day and ended more than 2% down. It was in sync with global cues which turned negative following a surge in infections in various countries including in Europe. Additional restrictions were being considered in Europe following an increase in infections. With high valuations and worries that earnings may not justify such valuations anytime soon, markets may trade uncertain for the time being. Stay cautious," said Vinod Nair, Head of Research at Geojit Financial Services.