The stock market came under heavy selling pressure in the last hour of the session on Monday, with the benchmark indices sliding over 2 per cent. Volatility index, India VIX, zoomed 13 per cent to 22.6 levels, indicating heightened volatility in the market. The S&P BSE Sensex fell 812 points by close to 38,034 levels while the NSE's Nifty slipped below the crucial 11,300-mark, down 254 points, or around 2.2 per cent, to end the session at 11,251 levels.
So, what dragged the markets lower on Monday?
Weak global cues: The fall in Indian frontline indices was in line with global peers. Asian shares slipped on Monday on worries about the global economic growth due to a resurgence of coronavirus infections in Europe. That apart, fading hopes for US fiscal stimulus also weighed on the investor sentiment. European shares fell to two-week lows while S&P 500 e-minis declined 0.6 per cent, pointing to a weak start for Wall Street on Monday. Most major Asian indexes were in the red and MSCI’s broadest index of Asia-Pacific shares outside Japan was 0.6 per cent weaker at 565.75, according to a Reuters report.
Further, nervousness ahead of US elections also dented investor sentiment, analysts say. The 2020 United States presidential election is scheduled for Tuesday, November 3, 2020. “History shows that the market has always corrected and remained highly volatile ahead of the US elections,” said Sudip Bandyopadhyay, Group Chairman at Inditrade Capital.
Surge in Covid-19 cases: With 86,961 fresh coronavirus cases and 1,130 deaths in 24 hours, India's Covid-19 tally on Monday inched closer to 55 lakh-mark with a total of 54,87,580 cases in 235 days since the first case was reported on January 30. India is the second worst-hit behind the US, which has 679,9044 cases and 1,99,474 deaths. READ MORE
Bank stocks tumble on FinCEN files: Between 2010 and 2017, a number of Indian banks helped facilitate transactions red-flagged by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) for suspected money laundering, terrorism, drug dealing and financial fraud, latest leaks suggest. According to the leaks, Indian banks received $482,181,226 from outside the country and transferred from India $406,278okay,962. These transactions were red flagged to the US authorities.
Among the Nifty Bank constituents, IndusInd Bank tumbled 8.3 per cent to hit an intra-day low of Rs 562 per share. Besides, Bandhan Bank tanked 7 per cent, RNL Bank (6.6 per cent), Punjab National Bank (5.6 per cent), and IDFC First Bank (6.4 per cent). READ MORE HERE
F&O expiry: Traders also booked profit ahead of the expiry of futures and options (F&O) contracts for the September series due Thursday, September 24. Most analysts expect the markets to remain volatile as traders either roll over or square-off their positions. “Since the market has rallied around 50 per cent from March-lows, some correction was due, which has come ahead of the F&O expiry now. The valuations also look quite stretched and thus a correction was in the offing. There's not much to worry about, as it is a healthy correction,” said Bandyopadhyay.
Mid-and small-caps correct: The sell-off in the broader market was more severe as the S&P BSE SmallCap and the S&P BSE MidCap indexes slipped around 3.5 per cent each to 14,747 levels and 14,532 levels, respectively. Both the indices have rallied over the past few sessions. Last week, the BSE SmallCap index recorded its sharpest single-day gain in over five months to hit a 52-week high. The rally was triggered by the Securities and Exchange Board of India’s (Sebi’s) move to tweak norms governing multi-cap funds. The nervousness and the sharp sell-off in these two market segments also created nervousness in the large-cap basket, which was already ripe for a correction.