The global equities selloff over fears of a new coronavirus strain in the United Kingdom (UK) had a cascading effect on India as the domestic stock market fell more than 4 per cent on Monday (December 21) before recovering.
The Sensex at one point was down 2,037.61 points, or 4.34 per cent, at 44,923.08 and the broader Nifty benchmark tanked to as low as 13,131.45, falling 629.1 points, or 4.57 per cent. The selloff was dominated by banking, financial services, automobile and metal shares.
The 30-share BSE index closed 1,406.73 points, or 3 per cent down, at 45,553.96, while the broader NSE Nifty settled 432.15 points, or 3.14 per cent, down at 13,328.40.
All Sensex components ended in the red, with ONGC leading the pack by tanking around 9 per cent. IndusInd Bank, M&M, SBI, NTPC, ITC, Axis Bank and PowerGrid shed up to 7 per cent.
“Domestic equities witnessed sharp selling pressure today (Monday) and wiped out more than ₹7 trillion of investors wealth in a single day,” said Binod Modi, head – strategy at Reliance Securities.
Concerns of new COVID-19 strain in the UK and emerging doubts over efficacy of COVID-19 vaccination dented investor sentiments globally, he said, adding that Indian market was among the worst performers as profit-booking also took place at higher levels.
Notably, volatility index witnessed sharp jump of 25 per cent, indicating more volatility ahead, he asserted. Several European countries, including France, Germany, the Netherlands, Belgium, Austria and Italy, have banned flights from the UK with the British government warning that the potent new strain of the virus was “out of control”. India, too, has suspended all flights from the UK between December 23-31.
The UK has imposed a stringent new stay-at-home lockdown from Sunday in London and other regions.
Stock exchanges in Paris, Frankfurt and London were trading up to 2.50 per lower in early deals. Elsewhere in Asia, bourses in Hong Kong and Tokyo ended in the red, while Shanghai and Seoul settled with mild gains. Global oil benchmark Brent crude futures plummetted 5.30 per cent to USD 49.49 per barrel.
“It is a bit too early to say anything, but there could be more of this healthy correction in the coming days. The markets are highly leveraged and lack of follow-up buying by foreign institutional investors ahead of Christmas holidays is making the markets fall of their own weight,” AK Prabhakar, head of research at IDBI Capital Markets, told NDTV.
Steady inflows of funds from foreign institutional investors (FIIs), advancements on COVID-19 vaccine development around the world and economic recovery drove the Sensex up by more than 80 per cent since March when it had hit the bottoms.
Vishal Wagh, head of research at Bonanza Portfolio, said, “European stock markets opened with sharp cuts after the new strains of the coronavirus was reported in the UK. Following this, many European countries have temporarily banned flights from the UK. This correction was overdue in the market, which was trying to find a reason and has found one now. Today’s (Monday’s) fall is merely profit-booking ahead of the new year.”