Investors ran for cover and the Sensex slumped 1110 points on Thursday over fears of a second wave of the coronavirus triggering more lockdowns and derailing the global economy.
The Sensex suffered its biggest single-day fall since May 4 to end at 36553.60, wiping out Rs 3.95 lakh crore of investor wealth. The NSE Nifty tanked 326.30 points to close at 10805.55.
Market circles are divided on their forecasts: some are expecting a pullback but others are warning of a difficult period as recovery is far away and the much awaited vaccine is expected only next year.
Investors are not just spooked by the global factors. Back home, measures taken both by the Reserve Bank of India (RBI) and the central government have failed to yield tangible results.
The first stimulus package was a major disappointment. And the Modi government is holding off on a second round of fiscal measures, giving investors enough reason to stay on the sidelines.
Though the RBI is likely to maintain its accommodative stance and use unconventional tools to kickstart the economy such as targeted long-term repo, an interest rate cut is being ruled out at its forthcoming meeting given the elevated retail inflation.
Market circles said it was the negative global cues that led to stocks opening in the red and remaining under pressure through the session. There were apprehensions about global economic growth as the UK is set to go into a second lockdown and travel restrictions return in several countries in Europe.
Further, there were mounting concerns over the recovery in the US with the weekly jobless showing a surprising rise on Thursday. There were more fears as the US Federal Reserve indicated it would not increase the size of its asset purchases amid fears that investors were poised to dump junk bonds.
“Investors have largely given up on the idea the US Congress will provide a new stimulus, while worrying about a recent rise in Covid-19 cases. Economists at Goldman Sachs cut their US growth forecast for the fourth quarter by half, to 3 per cent from 6 per cent,” said Deepak Jasani head of retail research, HDFC Securities.
“Investors are bombarded by a perfect storm of problems including rising virus infections, new lockdowns, a slowing economic recovery, stalled US stimulus talks and election uncertainty.”
Sliding for the sixth straight session, the 30-share BSE Sensex opened 37282.18 and fell below the 37000 mark to hit a day’s low of 36495.93 — a fall of 1172.44 points. It later settled at 36553.60 showing a drop of 1114.82 points or 2.96 per cent. The benchmark thus posted its biggest single-day fall since May 4 this year, when it had plunged over 2000 points.
Similarly, the NSE Nifty tanked 326.30 points or 2.93 per cent to close at 10805.55. The Sensex has now lost 2749.25 points in six days, while the Nifty has declined by 799 points. Barring Hindustan Unilever, which inched up 0.36 per cent, all Sensex components ended in the red on Thursday.
