Here's why investors lost Rs 9 trillion in trade on Monday

Index heavyweights such as Reliance Industries, HDFC Bank, HDFC, ICICI Bank, SBI, Bajaj Finance, TCS, and L&T declined up to 7 per cent.

Bears launched an all-out attack on the stock markets on Monday as record daily cases of Covid-19 infections weakened bull reign. The benchmark S&P BSE Sensex and the Nifty50 indices cracked nearly 1,900 points and 590 points to hit intra-day lows of 47,693 and 14,249 levels, respectively.

At close, the headline indices were 3.5 per cent lower each at 47,883 levels and 14,311 level, down 1,708 points and 524 points, respectively. Consequently, investor wealth plummeted by nearly Rs 8.69 trillion to Rs 200.9 trillion.

Volatility ran high in the markets as India VIX, the volatility gauge for the indices, soared over 16 per cent.

Index heavyweights such as Reliance Industries, HDFC Bank, HDFC, ICICI Bank, SBI, Bajaj Finance, TCS, Infosys, and L&T declined up to 8.5 per cent and contributed nearly 1,190 points towards the Sensex’s intra-day fall. That said, brisk-buying in fundamentally strong defensive counters such as Cipla, Cadila Health, and Dr Reddy’s Labs capped the fall.

“Since the second wave of the pandemic is turning out worse than expected, there is profound uncertainty about its impact on the economy and the markets. Since the situation is the worst in economically significant Maharashtra, this can impact the market's assumption of around 11 per cent GDP growth and above 30 per cent earnings growth,” says Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

From an investment viewpoint, he believes that pharma and IT sectors are likely to remain resilient even during a market downturn courtesy the health crisis and rupee depreciation. However, cyclical stocks are likely to be under pressure.

Here’s what led to the market crash on Monday:

Record Covid infections: Breaking all records, India recorded a massive surge of 169,914 Covid-19 cases in the last 24 hours, placing itself once again as the second-worst hit nation globally, with 13,527,717 cases in total, according to the Union Health Ministry’s data. Besides, India also witnessed a grim record of fatalities due to Covid-19 in a single day in 2021, which stood at 904.

Lockdown woes: The Maharashtra government is contemplating a state-wide lockdown to stem the rising cases of coronavirus, and may take a decision by Wednesday, April 14.

The state health minister Rajesh Tope said on Sunday that the government is discussing the duration of the lockdown and how to handle its economic fallout. “The task force is of the view that the prevailing coronavirus situation in the state is such that a lockdown is required,” he said.

Economically important state of Maharashtra accounted for 37 per cent of the total Covid cases reported on Sunday with over 63,000 new cases in its highest ever single-day surge along with 349 deaths.

That apart, many other states, including Delhi, have imposed strict restrictions including night curfews, capacity constraints, mandatory Covid-19 testing for inter-state travelers, etc.

Rupee depreciation, FPI outflow: Foreign portfolio investors (FPIs) have withdrawn a net Rs 929 crore from the Indian markets so far this month amid concerns over economic recovery.

According to the depositories data, overseas investors pulled out Rs 740 crore from equities and Rs 189 crore from the debt segment, taking the total net withdrawal between April 1-9 to Rs 929 crore, reversing buying trend of March ( Rs 17,304 crore), February (Rs 23,663 crore ), and January (Rs 14,649 crore).

Rusmik Oza, executive vice president, head of fundamental research at Kotak Securities notes that FPI outflows came on the back of a rise in Covid-19 cases and a sharper depreciation in the Indian rupee compared with USD.

The rupee on Monday opened at an eight-month low of 74.96 per US dollar compared with Friday’s close of 74.74/$. It further extended the fall and hit a low of 75.14 per US dollar.

Sell-off in banking counters: Banking stocks fell like a pack of cards at the bourses on Monday as a “sharper, stronger, and more dangerous” second wave of Covid-19 raised concerns of economic fallout.

The Nifty Bank index tumbled 1,613 points and hit a low of 30,835, a level last seen in January 2021. Individually, shares of RBL Bank, IndusInd Bank, IDFC First Bank, HDFC Bank, Axis Bank, and ICICI Bank skidded between 3 per cent and 8 per cent.

Public sector banks, meanwhile, faced an even severe blow with stocks of Indian Overseas Bank, Bank of India, Bank of Baroda, Canara Bank, Punjab National Bank, and State Bank of India losing in the range of 6 per cent to 9 per cent.