Stocks on Monday received a severe jolt as the new strain of coronavirus in the UK led to fears of the global economic recovery hitting a speed bump.
Amid negative global cues, the Sensex snapped its six-session record-setting streak and tumbled almost 1407 points. The intensity of the crash was such that more than Rs 6.59 lakh crore of investor wealth was wiped out.
While investors were in a profit booking mode from the steady gains made recently, sentiment nosedived as European markets cracked and safe-haven assets such as gold and the US dollar strengthened. This came after the UK government reported a new strain of the coronavirus that was up to 70 per cent more contagious.
Soon, the UK imposed a fresh lockdown in London and southeast England, warning that the potent new strain of the Covid-19 virus was “out of control”. Various European countries, including France, Germany, the Netherlands, Belgium, Austria and Italy, have banned flights from the UK. India too has suspended all flights from the UK till the year-end while the Maharashtra government announced a night curfew.
The 30-share index opened marginally lower at 46932.18 and remained rangebound till noon. However, shares were in for a free fall and the gauge soon hit a low of 44923.08 and later settled at 45553.96 — a fall of 1406.72 points or 3 per cent. This was its biggest single-day fall since May 4 this year.
Similarly, the broader NSE Nifty tanked 432.15 points or 3.14 per cent to finish at 13328.40. All Sensex components ended in the red, with ONGC leading the pack by tumbling 9.15 per cent.
“Today’s correction validated our recent cautious stance and this is how the market traps participants. Despite the market hitting new record highs in the last couple of weeks, we have been repeatedly advocating on booking profits and staying light.
“With today’s fall, we can see the last twelve day’s gains going for a toss, a classic revenge from the mighty bears,’’ said Sameet Chavan (chief analyst-technical and derivatives, Angel Broking, said.
One of the major reasons behind the recent bull run was the participation of foreign portfolio investors (FPIs).
Market circles, however, feel that their participation will be relatively low during the Christmas holidays and this could lead to volatility.
Provisional data showed they were net sellers to the tune of Rs 323 crore in Monday’s trading.
“We expect equities market to witness further volatility in the near term. Nevertheless, correction after big rally is always a healthy sign for the market and provide good opportunity to add quality stocks for investment purpose,” said Sanjeev Hota, head of research, Sharekhan by BNP Paribas.
