The markets received a reality check on Thursday after the unprecedented run-up this month. A sell-off in global markets amid renewed fears of lockdowns to curb the rise in Covid-19 cases dampened investor sentiment and triggered profit taking.
The benchmark Sensex closed at 43,600, down 580 points or 1.31 per cent, the sharpest fall since October 26. The Nifty50 index fell 167 points, or 1.3 per cent, to end at 12,772. The Bank Nifty index fell 2.9 per cent.
Analysts said the market had entered overbought territory and was precariously poised after the sharp run-up this month. The weekly expiry of derivatives contracts added to the volatility, they said.
Before Thursday’s fall, the Sensex had rallied 11.5 per cent and the Bank Nifty had surged 25.4 per cent in November amid robust buying by foreign portfolio investors (FPIs). Even on Thursday, the benchmark indices touched fresh highs intra-day amid optimism around progress in vaccine trials.
“There is slight damage to the bullish sentiment in the markets. In case we do not get another negative trigger soon, we could recover from this setback,” said Deepak Jasani, head of retail research, HDFC Securities.
Most global markets fell as many regions imposed fresh shutdowns, dashing hopes of a quick economic turnaround.
In the US, Covid-related deaths rose by the most in over six months on Wednesday and surpassed the 250,000 mark. Public schools were closed in New York City, and Colorado urged residents against travelling around the Thanksgiving holiday. On Wednesday, South Australia began one of the world’s toughest lockdowns and issued stay-at-home orders for all residents. In Tokyo, daily infections topped 500 for the first time, and the virus alert was raised to the highest level.
Experts said investors were torn between news of fresh shutdowns and vaccine progress.
On Thursday, medical journal, The Lancet, reported that the Oxford University-AstraZeneca vaccine candidate had shown a strong immune response. A day earlier, Pfizer said its candidate was 95 per cent effective in a final analysis of clinical-trial data.
FPIs remained net buyers despite the fall in the market. They bought shares worth Rs 1,180 crore on Thursday, taking their month-to-date buying tally to Rs 40,000 crore.
Analysts said Thursday’s fall indicated investor concerns about how businesses will manage the stress of new lockdowns. And, there are fears that increasing infections across the world and in some parts of India could offset the nascent economic recovery.
“The increasing virus infections raised fears of additional restrictions and considering its impact on global economic activity, market sentiments turned negative. This was in spite of the optimism surrounding the advanced stages of vaccine development. Indian markets also witnessed profit booking from recent highs, as investors turned cautious. We can expect short term volatility in the markets and investors are advised to remain cautious,” said Vinod Nair.
Two-thirds of the Sensex components ended the session with losses, and SBI was the worst-performing stock, ending the session with a 4.9 per cent fall. Axis Bank, ICICI Bank, and UltraTech Cements fell more than 3 per cent. Barring four, all BSE sectoral indices ended with losses. Banking and Finance stocks fell the most, and their gauges fell 2.8 per cent and 2.3 per cent, respectively.