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Global sell-off, lockdown fear: 5 reasons why Sensex tanked 1,115 pts today

The S&P BSE Sensex plunged 1,172 points in the intra-day deals on the BSE, while Nifty50 index tanked 342 points on the NSE

Markets | Stock market crash | Indian markets

Nikita Vashisht  |  New Delhi 

The markets were at their lowest since August 3, 2020. | Photo: Shutterstock
The markets were at their lowest since July 1, 2020. | Photo: Shutterstock

Indian stock crashed on Thursday, the last day of expiry for September series, as potential second wave of Covid-19 in the UK and Europe, and concerns over delay in economic recovery soured sentiment. The S&P BSE Sensex plunged 1,172 points in the intra-day deals on the BSE, while Nifty50 index tanked 342 points on the NSE. The were at their lowest since July 1, 2020.

The S&P BSE Sensex ended the day at 36,554 levels – down 1115 points, or nearly 3 per cent. Nifty50, on the other hand, ended at 10,806 levels, down 326 points or around 3 per cent.

Here’s what dragged lower:

Global sell-off: Global shares slid and the dollar rose on Thursday on investor concern about another economic hit from the pandemic. The MSCI World index slipped 0.6 per cent, its fifth day in the red out of the last six, and hovering near a two-month low. Asia-Pacific shares outside Japan fell 1.93 per cent, chalking up their worst day in two months after economic warnings from US Federal Reserve (US Fed) officials. In Europe, the STOXX Europe 600 was down 1 per cent.

After a summer lull in much of Europe and the UK, the infection rate has begun to rise sharply, with a number of countries including Britain introducing tougher rules to help limit the spread of the virus, Reuters reported.

expiry: Volatility index – India VIX – jumped 12 per cent in the intra-day trade to hit a high of 23.5 level on the last day of Futures and Options (F&O) expiry for the September series. Rollover in Nifty and Nifty Bank stood at 54 per cent and 58 per cent, respectively on Wednesday, as per reports. In index options front, there was a fresh build-up in 11,100-11,300 strikes; whereas, 10,950-11,100 put options added fresh positions, rollover data show.

The markets, according to analysts at Geojit Financial Services, entered the final expiry day with Nifty having seen the lowest rollover in the last six months at 53.82 per cent. Bank Nifty rollover at 57.86 per cent, however, was above last month’s rollover at a similar stage.

Sell off in heavy-weights: Index heavy-weights like Infosys, Reliance Industries (RIL), TCS, ICICI Bank, HDFC Bank, Bajaj Finance, HDFC and ITC contributed the most towards Sensex’s fall. Infosys, RIL, TCS, and ICICI Bank each contributed over 100 points towards the slide. Information Technology (IT) stocks were the biggest losers on the NSE today with the Nifty IT index sinking 4.5 per cent as investors booked profit after a sharp rally in the current financial year.

Add to it, financial stocks such as IndusInd Bank, RBL bank, ICICI Bank, and State Bank of India (SBI) tanked up to 7 per cent after global rating agency S&P cautioned that the banking systems in emerging markets like India, Mexico, and South Africa will be slower to recover to 2019 levels and it will happen only beyond 2023. READ MORE

Lockdown fears resurface: Prime Minister Boris Johnson has announced a slew of restrictions for England in the wake of a fresh spike in the number of Covid-19 infections. These new measures may last for six months, if there is no improvement in the pandemic situation, Boris Johnson told UK Parliament on September 22. Investors fear that more such restrictions could be put in place across major global economies as the cases continue to rise.

Meanwhile, India on Wednesday recorded 89,688 cases, taking its total caseload to 5,730,184. Prime Minister Narendra Modi chaired a high-level virtual meeting with chief ministers and health ministers of Maharashtra, Andhra Pradesh, Karnataka, Uttar Pradesh, Tamil Nadu, Delhi and Punjab on Wednesday and asked states to reassess if lockdowns of one or two days are effective in containing Covid-19.

“It is possible that we may see more corrections. Scotland and the UK have said they are contemplating a lockdown. Fears that more economies may close down is creating more nervousness in the market. All this is collectively bothering the market, which is on the lookout for reasons to correct,” said Abhimanyu Sofat, head of research at IIFL Securities in a note.

Adding: “If we see markets weakening further, it could add more jitters. I see strong support at 10,800 if the market were to weaken from here. Cyclicals will be hammered further. People have stocked up on defensive stocks, and that pack which has stayed resilient, may also feel the heat. Stability in the global markets could be the only savior right now.”

Pace of economic recovery: Investors fretted over recovery in the Indian economy after a finance ministry official said that the government was reassessing its earlier optimism about a V-shaped economic recovery as people are spending less owing to extreme uncertainty induced by the Covid-19 pandemic.

Most ratings agencies have revised further downwards their projections for India’s gross domestic product (GDP) for 2020-21 since the government released the data for the first quarter, which showed the biggest contraction of 24 per cent on record. READ MORE

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First Published: Thu, September 24 2020. 15:39 IST